Six major European economies want changes to the way financial markets are controlled in the European Union. According to these countries, the current system with national supervisors causes fragmentation and additional costs for companies and investors. That is why they argue for a different approach to the supervision of large stock exchanges.
Current system too fragmented
The proposal comes from Germany, France, Italy, Spain, Poland and the Netherlands. This was reported by Politico, which had access to a joint letter from the countries. They want major financial parties in Europe to fall under one central supervisor. They hope to make supervision simpler and more efficient.
The six countries believe that the current system no longer fits in well with the way companies and investors work today. Financial markets have become increasingly international in recent years. Many companies operate in several European countries at the same time.
As a result, they often have to deal with different national supervisors. This can be complicated and cause additional costs.
In an interview with BNR, Joost Schmets, deputy director at the Association of Securities Owners (VEB), calls this an important problem. He says: “Investors and companies are increasingly operating cross-border and therefore have to deal with different supervisors, which entails additional costs.”
A central supervisor could reduce this problem. The idea is that the European regulator European Securities and Markets Authority (ESMA) will have a greater role in monitoring major stock exchanges and other important market parties.
Before the proposal can be introduced, it must still receive broad support within the European Union. This requires at least fifteen Member States. The support of six major economies is therefore an important first step, but the plan must be further developed in the near future.
National supervisors will continue to exist
The proposal does not mean that national supervisors will disappear. In the Netherlands, for example, the Netherlands Authority for the Financial Markets (AFM) will continue to exist. The role of the AFM could change.
Major international players will then come under direct European supervision. Smaller parties remain under national control.
Schmets compares this with the supervision of banks in Europe. “Smaller banks are supervised by local regulators, while large banks are supervised by the European Central Bank.”
According to him, that system has worked well at banks. That is why many policymakers think that a similar approach can also help financial markets.
The plan also fits in with a broader goal of the European Union: the so-called capital market union. Europe wants to better connect financial markets and make investments within the EU easier.
Not all EU countries are enthusiastic
Yet there is also resistance to the plan. Countries with a strong financial sector, such as Luxembourg and Ireland, are particularly critical.
These countries fear that they will lose some of their influence on supervision. They are also concerned that companies may be less likely to choose their financial centers if the rules are determined more from Brussels.
According to Schmets, this concern is understandable. Some countries have built up a specific role in the European financial sector. Luxembourg and Ireland, for example, are important locations for investment funds.
At the same time, he believes, the current system can also lead to unwanted competition between supervisors.
“This creates competition in supervision, and that is never a good idea. Supervision is not intended to compete by turning a blind eye so that companies establish themselves somewhere.”
Possible impact on crypto exchanges in Europe
If the European regulator gains more power over large trading platforms, this could also have consequences for crypto exchanges active in Europe. Many crypto platforms, like traditional exchanges, operate in multiple EU countries at the same time.
Stronger European supervision can also ensure that the rules of the European crypto law MiCA are applied more consistently. The way in which countries carry out supervision still varies regularly.
Source: https://newsbit.nl/zes-eu-landen-willen-een-toezichthouder-voor-grote-beurzen/
