The Evolution of ESMA and Direct Supervision: Are there Implications for EU Supervisory Governance?

Abstract

The European Securities and Markets Authority (‘ESMA’) was established over six years ago. It, and its sibling bodies for banking, and the insurance and occupational pensions sector, emerged from the ashes of the crises, and the agencies have been the topic of much discussion in academic scholarship from a variety of perspectives. This article provides a new situating of ESMA within the broader policy context. Employing empirical observations, and rooting it within the related literature on supervisory governance (defined, broadly, as the supervisory practices and enforcement measures that contribute to governing the EU’s financial set-up), it explores ESMA’s pro-active use of its direct supervisory and enforcement powers, and uses this as a launching pad for reflecting on how EU supervisory governance is evolving.

Specifically, the article speculates that although ESMA is still at a relatively youthful stage with respect to its direct role, it is strengthening its reputation as a credible and pro-active supervisor, and is becoming an important driver with respect to the evolution of EU supervisory governance. This article suggests that, over time, ESMA’s influence and approach could gradually result in the greater centralisation of supervisory governance at the EU level. Linked to this, the article also speculates that any such shifts in this regard will continue to develop slowly, and over time, rather than via any seismic shift. Further, although there are a number of barriers and constraints to ESMA’s operation, the article suggests that none of these are intractable.

Keywords: European financial regulation; European Securities and Markets Authority; Supervisory governance

JEL Classification: G10, K22