EU Commission Vice President and ESMA Chair discuss Capital Markets Union and highlight implications of Brexit

EU Commission Vice President Dombrovskis has delivered the opening remarks at the public hearing on the CMU mid-term review. The remarks were intended to take stock of progress and highlight that more than half of the initially programmed 33 actions have been delivered, including:

• an agreement on the simplification of prospectuses;
• legislative and non-legislative actions on venture capital;
• the Commission's Action Plan on consumer financial services;
• proposals on preventative restructuring; and
• proposals to tackle the bias against equity in national tax systems.

Moreover, the Commission has also been working on legislative proposals to address remaining sources of friction to cross-border passporting of funds. Among other things, Dombrovskis called for the co-legislators to commit to the success of the proposals.

The Vice President also highlighted investment challenges that were not foreseen when the CMU Action Plan was published, in particular the UK Government's intention for London, the EU's largest capital markets hub, to leave the Single Market. Dombrovskis set out his view that particular consideration will need to be paid to market segments where the UK accounts for over 70% of current EU activity. He also called for the European Supervisory Authorities (ESAs) to have powers to deal with observed weaknesses in national enforcement and, through the Commission's consultation on ESAs review, reflect on targeted changes to the powers of the European Securities and Markets Authority (ESMA) in particular. The speech also highlighted responses to the Commission's public consultation on fintech, which the Commission intends to draw on to identify new issues that may need to be integrated into the CMU policy framework.

At the close of the public hearing, the Chair of ESMA, Steven Maijoor, delivered the keynote address which focussed on supervisory convergence. Among other things, Maijoor illustrated ESMA's convergence work with the examples of CCPs, contracts for difference (CFDs) and binary options, and the UK exit from the EU.

On Brexit, the speech set out details of ESMA's current work towards developing a convergent position on key issues to be taken into account when market participants move some of their activities from the UK to the EU27, which ESMA intends will avoid competition on regulatory and supervisory practices between Member States and a possible race to the bottom, which could be detrimental to the CMU. In summer 2017, ESMA intends to publish:

• a general opinion on cross-cutting issues, such as how national competent authorities (NCAs) should ensure ongoing effective supervision of relocated activity, in particular with regard to outsourcing and delegation of certain functions; and
• three specific opinions to address asset management, investment firms and secondary markets, to provide sector specifications on the aspects described in the general opinion.

ESMA is also working to establish a mechanism whereby NCAs would share live cases at EU level regarding UK market participants seeking authorisation in the EU27, in order that ESMA may coordinate the consideration of key issues in the authorisation procedures for these entities to reach common views on significant relocation files.

The speech also called for a structural upgrade to ESMA's convergence powers and a bolder strategy on financial data.