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Steven Maijoor (ESMA): Making markets safer

The European Securities and Markets Authority is working together with national competent authorities like CSSF. An interview of Steven Maijoor, Chair of ESMA since 2011.

How is ESMA* enhancing investor protection and promoting stable financial markets?


Financial services have a significant impact on investors, which is why ESMA has a specific objective in its Regulation to promote investor protection, which it is committed to doing through the various tools at its disposal. We achieve this, in cooperation with the national authorities in each Member State, by ensuring that the rules governing the conduct of firms that sell or advise consumers to buy financial instruments are implemented in a consistent and coherent manner across the EU. Firms have a duty to treat their customers in a fair and transparent way and put customers’ interests at the centre of their business models and corporate culture. MiFID II, which came in force at the beginning of this year, further strengthens the protection of investors through the introduction of new requirements on product governance and independent investment advice. It also provided ESMA with EU-wide product intervention powers, which we first exercised on 1 June, regarding the provision of contracts for differences (CFDs) and binary options for retail investors.

In addition to protecting investors, the two other main ESMA objectives are to ensure orderly markets and safeguard the stability of financial markets. This is why ESMA identifies and assesses, at an early stage, trends, potential risks and vulnerabilities, across borders and across sectors. Particular attention is paid to any systemic risk posed by financial market participants or related to financial innovation that may impair the operation of the financial system or the real economy.


" All of ESMA’s policy decisions are the product of a collaborative approach involving the national competent authorities "


After an era of under-regulation, do you see a risk of over-regulation in Europe? Regulation is becoming a competitive edge? How do you analyse this trend on a global scale?


Looking at the lessons learnt from the financial crisis, I think it was, and is, important to have, for example, credit rating agencies supervised and derivative trading made more transparent, allowing for improved monitoring of sectoral and systemic risk, both regionally and globally. While, it took some time to fix these issues globally and within the EU through new rules, the resulting safer and more transparent markets is a common good to the benefit of all investors. Of course, new regulation comes at a cost and it is normal that at times where new rules are implemented, voices are rising about too much and too detailed regulation. However, I think the post-crisis institutional and regulatory changes the EU has introduced were necessary and we now need to observe how these changes play out over time. The European model has enough built-in flexibility, through regular reviews, to adapt its rules going forward if need be. One of the key goals remains regulatory convergence, both within the EU and globally. Financial markets are global markets, which need globally comparable rules and we work closely with our international counterparts on areas of common interest to address any potential conflicts or unintended consequences.

The impetus for much of today’s regulation goes back to the global agreement at G20 level, while much has also been achieved at IOSCO level too with the key markets committing to following the same regulatory path. Another lesson learnt from the crisis is the detrimental effects regulatory arbitrage can have. Therefore, Europe has invested a lot in increasing the coherence across the Union for which the European Supervisory Authorities, like ESMA, play a pivotal role, which becomes yet more important with Brexit. Financial markets are competitive markets driven by innovation. As regulators, we are committed to ensuring the same ground rules apply no matter where you invest thus protecting investors from undue risk.


How is ESMA interacting with a national financial regulator like CSSF in Luxembourg?


ESMA is closely working with all national competent authorities, such as the CSSF. Claude Marx is a member of ESMA’s Board of Supervisors along the other 27 Chairs of national regulators. However, what many people may not know is that there is also continuous cooperation on daily issues, where NCAs’, including the CSSF’s, staff are represented and involved in the development of ESMA’s technical work through its standing committees, working groups or task forces. Our governance structure is such that all of ESMA’s policy decisions are the product of a collaborative approach involving the national competent authorities and are ultimately decided upon, and endorsed, by the Board of Supervisors. This collaborative approach is also essential to achieve a common supervisory culture across national regulators.

*European Securities and Markets Authority

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