Why the Place does not want the sole supervisor

No, we do not want a single EU financial markets supervisor. The Minister of Finance, (CSV), reiterated Luxembourg’s position at the Eurogroup meeting on May 13. Other Member States have expressed a similar view, in response to .

This dialogue of the deaf takes place against the backdrop of discussions on the efforts to be made to integrate European capital markets, with the objective of unlocking their potential to finance businesses and the economy. Among these efforts, we mention the progression towards more integrated supervision in the field of securities. Clearly, after having centralized the supervision of banks, the EU plans to do the same for stock exchanges or asset managers.

Concretely, this involves strengthening the direct supervisory powers of the European Securities and Markets Authority (Esma). For now, its direct supervisory role is limited to a handful of rating agencies. The body based in Paris mainly plays a role, on the one hand, of coordination between the different national authorities, and on the other hand, of regulatory production – with a view to standardizing and harmonizing practices within the EU .

“A delicate balance”

In Luxembourg, the main party concerned by this possible reorganization of powers, the Financial Sector Surveillance Commission (CSSF), does not take a position. “In general, the CSSF does not comment on announcements made by European institutions or by heads of state of other EU member states,” said the gendarme.

The key message is given by the Ministry of Finance: the current system works. “Even in the absence of centralized surveillance, the EU has already put in place, with the European Supervisory Authorities (ESAs), a highly integrated surveillance architecture, which goes well beyond the system in place to other sectors of the internal market,” argue Gilles Roth’s services.

Even if daily monitoring is left to the national authorities, Esma exercises real influence, according to the ministry: “The Esa are endowed with very powerful powers of convergence, which allow them to evaluate the work of the supervisory authorities, to decide disputes and sanction cases of non-compliance with the applicable regulatory framework. Drawing on the experiences and expertise of national supervisory authorities, this system is based on a delicate balance between supervisory powers and inclusiveness. It ensures a uniform interpretation of the applicable regulatory framework, taking into account the specificities of the markets and the different local contexts that exist within the EU.”

“Let us be careful not to unnecessarily complicate the supervision system already in place,” adds the Association of Banks and Bankers, Luxembourg (ABBL), through its CEO, . “While we support the idea of ​​a Capital Markets Union, we still need to discuss how it should be structured. The main risk, with a single EU supervisor of financial markets, is to add an additional layer of supervision – therefore generating additional costs – without improving this supervision. The CSSF already demonstrates great competence. Adding a supranational supervisor does not guarantee better risk management.”

But why not subject financial market players to a centralization that is already effective for the big banks? “The centralization of supervision makes perfect sense for systemic banks because they play a role in transforming public savings. The asset manager plays a fiduciary role: connecting investors and assets. We are not at all in the presence of the same risks”, argues the CEO of the Luxembourg Association of Investment Funds (Alfi), .

For the representative of the funds industry, this question of a single supervisor does not answer the real issue: the mobilization of dormant savings (more than 10,000 billion euros in current accounts and savings accounts) on European capital markets.

Serge Weyland takes the example of European asset managers: “They face protectionist national regulations. When a manager launches a private equity fund targeting European SMEs, he must create a Luxembourg fund, but also a fund under French law to be eligible for life insurance in France, a fund under Spanish law to benefit from tax advantages… This creates additional costs and complexity which harms competitiveness. A single regulator would not change this situation because it would not have the authority to modify national legislation, such as the insurance code in France or tax policies in Spain.”

Criticisms which do not shake the French. “We are in the phase of explaining our approach. We want to move forward with the Luxembourgers on this issue,” we said in the office of the Minister of the Economy, Bruno Le Maire. Where we cite a shared objective: that the capital markets union should be at the top of the work program of the next European Commission.

Basically, Bercy is not giving up: “The EU must provide itself with more unified supervision, like in the United States. We have made a very big effort on regulations, which are now more harmonized at European level. But we are faced with very different methods of supervision from one country to another.”

Only for big players

There is no question of creating “the Moscow of supervision”, insists those around Bruno Le Maire. “Firstly, it is not a question of centralizing all supervision, but only that of large funds and market infrastructures which operate on a transnational scale. Second, it is not about crushing national authorities: we want to follow the banking union model, where joint teams of national and European supervisors collaborate. Third, it is only a question of supervision, not of reducing competition between financial centers.”

And why put asset managers in the same regime as banks? At Bercy, we agree: the risks are not identical. “Nevertheless, investment funds, for example, present liquidity risks which may be systemic. And it is also a question of market fluidity: today, to be able to distribute a fund across the EU, you must obtain the stamp of each national supervisor and adapt to its marketing regulations. Hence the interest in centralized supervision.”