04 June 2019

Steven Maijoor addresses FESE 2019 Convention Opening Dinner

ESMA's Chair Maijoor focused on the challenges of cross-border regulation and supervision; on strengthening the EU approach to cross-border regulation and supervision; on the equivalence process; and on Brexit and the exchange of secondary market data.

The challenge of cross-border regulation and supervision

Financial markets are – by their nature – global, while regulation and supervision are national or regional. This implies a continuous challenge both for the financial sector as well as for regulators and supervisors. As a result of differences in regulation and supervision, the financial sector may be confronted with barriers, limitations or increased costs, and, understandably, requests resolution of those differences. Equally understandable, regulators are pointing to the constraints of their legal frameworks and mandates. Regulators, to respond to this continuous challenge, should do their utmost to find and use tools to adequately address cross-border issues and support the functioning of global financial markets.

Strengthening the EU approach towards cross-border regulation and supervision

Looking to the future, the EU approach towards cross-border regulation and supervision is changing. The fact that the largest capital market will leave the EU has accelerated a reconsideration of our third country arrangements. As the UK will continue to be an important capital market for the EU post-Brexit, it is also vital that an appropriate EU framework for third-country regulation and supervision is in place. Based on the current EU equivalence regimes, regulation and supervision of third country entities would be conducted solely outside the EU, typically without the provision of any specific safeguards from an EU perspective.

At the same time, many third country market players will continue to play an important role in the EU financial system, while affecting its stability and how EU investors are protected. ESMA already pointed out well ahead of Brexit that full reliance on third country rules and supervision was not appropriate for systemically relevant CCPs.

The improved EU approach towards cross-border regulation and supervision is already reflected in EMIR 2.2, as well as EU legislation which will come into force later this year following the ESAs review.

Equivalence process: closer monitoring, more transparency and consistency

As indicated earlier, one key part of the improved EU approach is the more frequent monitoring and review of equivalence decisions to detect emerging differences between EU and non-EU frameworks on time. I am glad that the ESAs’ review gives ESMA both this new requirement and the necessary resources to live up to this important task starting in early 2020. Once we have implemented the necessary processes, we will continue to be as transparent and consistent as possible when conducting our part of the equivalence processes. I know how much value stakeholders attach to transparency and consistency regarding equivalence processes.

In this context, clear and transparent communication is an important part of regulatory cooperation with our non-EU partners. The underlying EU equivalence frameworks for various sectors of capital markets are complex, and so through dialogue we can help the international community to better understand the EU framework, which I am personally committed to. More generally, good cooperation between regulators is one of the key-pillars of successful cross-border regulation and supervision and ESMA continues to be committed to that, both on a bi-lateral basis and through active participation in global standard-setting bodies like IOSCO and the FSB.

Brexit and the exchange of secondary markets data

Finally, I want to make a remark on Brexit and the exchange of secondary markets data. It may sound surprising given how long the Brexit process has been with us, but these remarks risk being premature: without the Withdrawal Agreement and Political Declaration being agreed by both sides, it is uncertain what the framework for regulatory cooperation in financial services will be. What is certain, irrespective of the future regulatory and supervisory arrangements, is that the financial markets of the UK and the EU27 will continue to be highly interconnected, especially in trading.

According to the draft Political Declaration, the future relationship will be governed by the regular arrangements regarding third countries and both the EU and UK are committed under this Declaration to undertake equivalence assessments and endeavour to conclude these before the end of June 2020. That approach is consistent with the UK leaving the EU and the need to have a level playing field across third countries. Having said that, personally I think there is one area where, in the future, we need to consider if additional arrangements can be achieved: this concerns the exchange of secondary markets data.

Currently, data is exchanged daily between all EU NCAs, including the UK, to facilitate, for example, the combating of market abuse. This data exchange is governed by extensive and detailed regulatory requirements. As trading will continue on a cross border basis with the UK, it is essential that we consider how we can continue to exchange data with the UK FCA. Global integration of financial markets can only be viable in the long term when regulators can continue to access the related data on a cross-border basis. That is essential to protect investors and the integrity of financial markets.

Full speech

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