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The budget given to ESMA is currently derived from three sources: the European Union’s budget, contributions from European member states, and fees from entities it has direct supervision over, namely credit rating agencies and trade repositories for OTC derivatives. Steven Maijoor said: "One issue where there needs to be an improvement is the funding of ESMA. One of the reasons this is problematic is because our funding comes from national regulators: the same authorities that need to deliver more because of new regulations like the European Market Infrastructure Directive, the Alternative Investment Fund Managers Directive etc. When they give us more, they get less. This is a twisted and inappropriate funding system."
This year, ESMA has a budget of €33.2 million, an increase from 2013’s total of €28.2 million. Around 45 per cent of this year’s total will be made up of contributions from national regulators. According to Maijoor, ESMA’s funding should be weighted more towards market-based fees that come from entities that are directly supervised by the agency. As an example, Maijoor pointed to overseas clearing houses that have to register with ESMA in order operate in the EU under the European Market Infrastructure Regulation, the region’s swap market overhaul. He said: "This is a normal funding model across Europe for securities market regulators. I think the remainder should come from the EU budget and that we should limit or completely abolish contributions from national regulators."
James Hughes, account manager at Brussels-based lobby firm Cicero, said: "A model that lets ESMA collect fees from the entities it has direct supervision over would replicate the relationships between firms and their national regulators, so it seems to be a sensible approach. It would also help to cut the reliance on funding from national regulators."
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