24 May 2012

ESMA/Verena Ross: Speech at the ICMA conference in Milan on the EU regulatory framework and the role of ESMA

Single rule book

One of ESMA’s key activities is contributing to building a single rule book for the regulation of the EU’s financial markets and ensuring its consistent application at national level.

ESMA has played its part in producing detailed requirements and standards by:

• producing the technical standards for credit rating agencies (CRAs) and short-selling;
• conducting significant work in order to prepare technical standards for the OTC derivatives regulation;
• providing advice to the Commission for secondary legislation in areas such as prospectuses and alternative investment funds; and
• providing more detailed guidance and recommendations in areas such as automated trading and ETFs.

Supervisory convergence

The single rule book is a necessary tool to face the crisis and build a safer and efficient financial market, but it is not sufficient. It needs to be complemented by supervisory convergence in order to be fully and efficiently implemented on the ground. This is core to ESMA’s mission in achieving common approaches to regulation across the EU.

• ESMA has issued opinions on the treatment of sovereign debt under IFRS and on a number of pre-trade transparency waivers under MiFID;
• ESMA has coordinated bans on net short positions in Belgium, France, Italy and Spain last summer;
• During that period, ESMA also coordinated the monitoring of market developments and market infrastructure resilience; and
• Finally, ESMA conducts peer reviews of national authorities’ activities in order to assess the degree of convergence in the application and enforcement of EU law. ESNA recently published the results of two of these peer reviews, one on prospectuses and the other on market abuse and the use of sanctions.

Direct supervision

Beyond the supervisory convergence agenda, the legislators have gone further in some areas and have placed significant cross-EU market players under the direct supervision of ESMA as European authority. This is the case for CRAs at the moment. Last year, following the registration process, ESMA became the sole supervisory authority for CRAs in the EU. ESMA has already undertaken a programme of on-site visits as part of its direct supervision of these entities.

International cooperation and convergence is difficult but absolutely necessary. In coordination with the European Commission, but also in close cooperation with national regulators, ESMA plays a central role in ensuring that Europe speaks with one single voice vis-à-vis regulators outside the European Union.

Regulators have set up a number of international groups aiming at achieving international consistency of the different regimes, and ESMA plays a full role in this global dialogue. This is the case in the areas of the OTC derivatives, the regulation of CRAs and alternative investment fund managers.

As no single regulator can seek to regulate global financial markets from one location, equivalence, mutual recognition and cooperation must be relied on in order to make progress. There is no alternative to close international cooperation, both in the setting of standards and in the execution of day-to-day supervision, if we want to achieve an efficient system for the global financial markets.

Full speech

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