Bank Regulation

EU To Centralize Market Supervision At Banks’ Expense

The European Union wants market supervision to integrate more fully than has been the case, with the price tag borne by the very banks being scrutinized.

According to a Reuters news report, that strategy gives a hint as to how capital markets may reconfigure the way business is done in the wake of Brexit. The shift was floated by European Commission Vice President Valdis Dombrovskis on Thursday, ahead of a meeting in Estonia of EU finance ministers slated to be held today (Sept. 15).

One stumbling block has been removed, as Britain’s 2019 exit would mean that its weight in deciding EU practice and policies would be effectively sidestepped. Said Dombrovskis, “We can go further on the path toward supervisory convergence by empowering the European Securities and Markets Authority (ESMA) to directly supervise certain firms.” That would mean regulators across the insurance and banking industries would gain a bit more latitude – perhaps in coordinating what are known as sandboxes, in addition to boosting capital flows into green energy finance and other initiatives, as the vice president said.

Amid regulatory discussions, the U.S. Commodity Futures Trading Commission has said that an agreement that is in place between the U.S. and EU, which governs clearing house interactions on derivative transactions, should not be disrupted. Chairman of the CFTC, Christopher Giancarlo, has stated that the agreement could be impacted by EU attempts to “clamp down” on clearing euro-denominated financial instruments after Brexit (according to Reuters).

Other deals for derivatives platforms are in the works, said Reuters. According to Dombrovskis, “financial crisis illustrated the international nature of our financial system, and the importance of a common approach to financial regulation.” In the current FinTech sector, the regions should agree on banking rules as they apply to trading, but the U.S. Treasury said that applying both sets of rules should be delayed until further clarity is in place.

 

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