Towards an SEC in the European Union: unified supervision or single supervisor?

Recently a number of calls have raised the need to establish a single European Union (EU) supervisory authority for capital markets in order to facilitate the emergence of a bona fide savings and investment union. Although the Securities and Exchange Commission (SEC) in the United States has sometimes been mentioned in this context, it is in fact the Single Supervisory Mechanism (SSM) that is the standard—the largest banks or those with cross-border activities are under the direct supervision of the European Central Bank (ECB) with the help of national supervisors, while other credit institutions are under national supervision coordinated by the ECB.

The goal of creating a veritable Capital markets union, making it possible for savings generated in one EU Member State to be invested without problem in products created in another Member State, or similarly, for investments put together in one Member State to be financed from any EU Member State, is embodied in the fundamental European freedoms applied to financial services: freedom of movement of capital and freedom to provide financial services through the freedom to establish branches and the freedom to market a financial product developed in another Member State in any EU Member State. This goal naturally leads to the need to rely on a body of common rules (the single rulebook) and on uniform implementation through unified supervision. However, when we get into the details of the players to be covered and the products to be supervised, into the concrete organization and governance of this unified supervision, conceptual differences become apparent: unified does not necessarily mean single, and the numerous national specificities—bankruptcy law, securities law, criminal law, and so on—are cited as reasons for rejecting unified supervision. 

At its meeting on April 17 and 18, 2024, the European Council identified the main drivers of the Union's competitiveness. It called for studies to be carried out decisively and rapidly to improve competitiveness. Among the studies, concerning the Capital markets union, it invited “the Commission to assess and work on the conditions for enabling the European Supervisory Authorities to effectively supervise the most systemic relevant cross-border capital and financial market actors, with the aim of strengthening financial integration and ensuring financial stability, simplifying processes and reducing compliance costs, taking into account the interests of all Member States” (European Council, 2024).

However, the roadmap sent by President von der Leyen to the Commissioner in September seems less ambitious: while the Savings and Investments Union figures prominently, the only mention of supervision is “improving the supervisory system at the EU level” (European Commission, 2024 b).

Within this shifting context, the intention of this debate paper is to help clarify the issues and develop realistic goals. It will not deal directly with elaborating financial regulation, but rather with how to implement financial supervision. Both functions are often assumed by the same authority, but each has its own logic.