EU unveils financial markets integration package

The European Commission today unveiled a package of measures to deepen integration of EU financial markets, targeting fragmentation across trading, post-trading, fund distribution and supervision.

The initiative — presented under the Commission’s broader Savings and Investments Union (SIU) strategy — includes one Commission communication and three legislative proposals that would collectively overhaul many of the EU’s cornerstone financial regulations.

Unveiling the package, Maria Luís Albuquerque, European Commissioner for Financial Services and the SIU, said market integration was not a technical exericse but “a political imperative for Europe’s prosperity and global relevance”.  

She said the package was a deliberate choice to no longer tolerate “a level of fragmentation that holds back our economy”. 

“By building a real Single Financial Market, we will give people better opportunities to grow their wealth, and we unlock stronger financing for Europe’s priorities.

According to the Commission, the package will significantly simplify the EU regulatory and supervisory framework.

One regulation proposal is for amending dozens of existing frameworks, including the European Markets Infrastructure Regulation, the European Securities and Markets Authority Regulation (ESMA Regulation) and the Cross-Border Distribution of Funds Regulation.

The same regulation would also incorporate targeted amendments, in line with changes proposed to the ESMA regulation to make EU supervision more efficient, to a range of regulations, such as on benchmarks, securities financing transactions, EU Green Bonds, and ESG ratings. 

Meanwhile, a proposal for new directive seeks to update rules governing investment funds and asset managers — namely the Alternative Investment Fund Managers Directive (AIFMD), the Undertakings for Collective Investment in Transferable Securities Directive (UCITS) and the Markets in Financial Instruments Directive (MiFID).

The third proposal is for a new regulation to replace the Settlement Finality Directive and adjust the Financial Collateral Directive.

ESMA reaction

ESMA welcomed the proposal, highlighting as a key element the proposed transfer of direct supervision of certain significant cross-border infrastructures and crypto-asset service providers to the EU level.

“ESMA stands ready to take on these specific responsibilities, drawing on almost 15 years of growing experience supervising diverse and selective parts of our capital markets,” it said in a statement.

It added: “This proposal represents a shift in supervision for a limited subset of our capital markets, in which ESMA would work hand in hand with the National Competent Authorities (NCAs) to develop the capacity and expertise to take on such new responsibilities.”

At the same time, for the broader market that remains under national supervision, coordinating supervisory standards and achieving aligned outcomes across the EU remains a key priority, ESMA noted.

This would be reinforced, for example, by giving ESMA an enhanced “convergence role” for large cross-border asset management groups.

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