In an
FT article Mr Demarigny, Secretay General of the Committee of European Securities regulators (CESR) outlined the role of
CESR when representing EU regulators as a collective to the outside world. 'We need predictability, so that when market players go to country B they know supervisors will ask them more or less what they were asked by their home supervisor in country A and that they will behave in the same manner,' Mr Demarigny says.
The same applies to investors, whether institutions or individuals. 'I hope the investor can be confident his money will be protected [elsewhere in the EU] in a similar way to at home,' he says. 'For banking supervisors the key objective is stability. For securities supervisors, it is that the buyer and seller meet with trust . . . If that condition is not met then the single market will simply not happen.'
'Our role is to make all these people know each other, understand each other and make it normal behaviour to call European colleagues to work together,' says Mr Demarigny.
In a recent paper from the Groupe d'Economie Mondiale at Sciences-Po in Paris, Ruben Lee wrote: 'As financial firms become more integrated across the EU, they are likely to view a European SEC as more advantageous than the current fragmented regulatory environment.
Mr Demarigny wants to create a new mediation system to resolve disputes between regulators when, for example, one tells another it is too lax in authorising service providers, while being thought of itself as too rigid.
But otherwise, his focus is on attitudes not institutions. '[My priority] is to make sure that the members of Cesr resist the tendency to forget what they have agreed because of protectionism or fear or whatever . . If we're not successful in doing this we will simply inhibit cross-border activity.'
Full FT article:
No sooner has he entered the meeting room than Fabrice Demarigny, is busy switching the miniature flags on the table.
Into the cupboard goes a US Stars and Stripes, which had been paired with the flag of the European Union. 'We don't need that,' declares the secretaryÂÂgeneral of the Committee of European Securities Regulators. 'That was for our meeting with the Securities and Exchange Commission.' He replaces it purposefully with the line-up of 25 EU member flags.
The two flag arrangements in the Paris headquarters of Cesr - pronounced 'Caesar' - say much about the job handed to the organisation and the inevitable complications that entails.
Each EU flag denotes a national securities regulator - policing equity, bond and derivatives markets in its respective territory - and Cesr provides a hub through which they can co-operate. Its goal is to facilitate more consistent supervision: on its success hinge money-making opportunities for business and investors.
At the same time, Cesr seeks to represent EU regulators as a collective to the outside world. Hence Mr Demarigny's meetings with SEC officials to discuss how to narrow differences - or at least avoid conflicts - between US and EU regulation of anything from listing requirements and accounting to credit ratings.
But when Cesr sits across the table from the SEC, like is not facing like. The US watchdog is a lone institution, whereas Cesr is a network of institutions: many strong-minded, bathed in prestige and conditioned by national laws, politics and traditions. And it is no mean feat building an EU-wide consensus on how to authorise products and providers of financial services, how to supervise markets and define and penalise wrong-doing.
The region is developing a well-harmonised body of rules thanks to the EU's financial services action plan (see below), a source of new directives on market abuse, accounting, prospectuses, trading systems, retail investment funds and more.
But rules mean nothing without enforcers, so it is the interpretations and judgments of securities regulators that will determine whether the FSAP leads to consistency.
Mr Demarigny, who reports to the European Commission as well as the European parliament and national governments, is an implacable cheerleader for the cause, which he says is indispensable to creating a single market.
'We need predictability, so that when market players go to country B they know supervisors will ask them more or less what they were asked by their home supervisor in country A and that they will behave in the same manner,' he says.
The same applies to investors, whether institutions or individuals. 'I hope the investor can be confident his money will be protected [elsewhere in the EU] in a similar way to at home,' he says.
'For banking supervisors the key objective is stability. For securities supervisors, it is that the buyer and seller meet with trust . . . If that condition is not met then the single market will simply not happen.'
Staffed by just 20 people in Paris, Cesr's mandate has evolved from advising the Commission into a more active role: pressing watchdogs to take similar decisions on similar issues and to accept permits and approvals issued by peers elsewhere.
'Our role is to make all these people know each other, understand each other and make it normal behaviour to call European colleagues to work together,' says Mr Demarigny.
Some see the appeal of going further and creating a unified European SEC, building on Cesr's foundations, which could deal with its US counterpart as an equal.
In a recent paper from the Groupe d'Economie Mondiale at Sciences-Po in Paris, Ruben Lee wrote: 'As financial firms become more integrated across the EU, they are likely to view a European SEC as more advantageous than the current fragmented regulatory environment.
'The consolidation of exchanges, central counterparties and central securities depositories across Europe is highlighting the problems of multiple regulation.'
Cross-border financial scandals, such as the collapse of Bank of Credit and Commerce International in 1991, tend to spark cries for more consolidated regulation, and Citigroup's disruptive 'Dr Evil' eurozone bond trade last August - which prompted separate regulatory probes in at least five countries - had the same effect.
Pervenche Berès, chair of the European parliament's influential committee on economic and monetary affairs, said earlier this year amid new revelations about the trade: 'You can't have a single market without a lead regulator overseeing it.'
Mr Demarigny, however, rears up at the suggestion that Europe needs an SEC of its own.
'My question is: to do what?' he says. 'You have to identify what needs to be done before creating an institution. To create an institution and then think about what it can do is the wrong way round.'
In contrast to the European Central Bank, which is a 'top-down' creation of EU heads of state, he says: 'What we are doing here is bottom up.' Cesr is 'adaptive', reacting only as markets integrate and kinks in the regulatory landscape emerge.
Hedge funds provide a perfect example: 'The market has started, regulators in Europe are putting in place national regimes, and now the question is whether an EU regime is needed. The Commission is consulting and the debate is happening,' he explains.
To make its job easier, Cesr has called on national governments to ensure its 25 EU members have equal powers in terms of strength and scope.
'Equivalent supervisory powers are a prerequisite for any kind of EU supervisory system to work,' the organisation recently told an Ecofin meeting of finance ministers.
Some EU members, however, do not appear convinced. Emphasising that national constitutions and lawmaking must be respected, Sweden's finance ministry told Cesr in a consultation earlier this year that supervision had to be 'sufficient' across the EU, but not identical.
Finland's finance ministry said that what mattered was the equality of results, and warned that the call for identical powers cast doubt on the mutual recognition principle that underpins the internal market.
Some industry comments, from securities dealers' associations and the European Banking Federation, among others, said Cesr should not be granted significant new regulatory powers and that its focus should be on making the best use of existing structures.
Mr Demarigny wants to create a new mediation system to resolve disputes between regulators when, for example, one tells another it is too lax in authorising service providers, while being thought of itself as too rigid.
But otherwise, his focus is on attitudes not institutions. '[My priority] is to make sure that the members of Cesr resist the tendency to forget what they have agreed because of protectionism or fear or whatever . . If we're not successful in doing this we will simply inhibit cross-border activity.'
© Financial Times