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MNI EXCLUSIVE: MEP Warns ESA Governance Plan May Fall In Parlt

MNI (London)
--MEP Tells MNI EC's Fin Supervisory Governance Reforms Won't Pass
--Expert Says Hopes Proposals Will Be "Significantly Improved"
By Tara Oakes
     BRUSSELS (MNI) - The European Commission launched its official proposal for
stronger supervision of financial markets Wednesday, in line with plans first
reported by Market News on Monday.  However, the plans immediately ran into
objections from legislators and industry experts particularly plans striping
lawmakers the powers of final appointments to senior positions on regulatory
     For German MEP Sven Giegold, economics and financial spokesperson for the
Greens/EFA parliamentary group, this would a step too far in removing powers
from the European Parliament.
     "Losing the right of nominating the ESA chairs: I'm deeply convinced that
this will never have a majority in the parliament," he told MNI.
     Brexit has added fuel to the fire of an EU push for stronger financial
integration within the bloc, including the beefed-up powers for the supervisory
     All three of the current micro-prudential bodies -- the European Securities
and Markets Authority (ESMA), the European Banking Authority (EBA) and the
European Insurance and Occupational Pensions Authority (EIOPA) -- are set for
changes under the proposals.
     The ESAs would all be fitted with an executive board with full-time members
to replace the management board, if the proposal passed. Members would be
appointed by compilation of a shortlist, to be submitted to the European
Parliament for approval. The EU Council would then have the ultimate say in
appointing them.
     The same process would be true of the Chairperson.
     The proposals for new governance structures also sat ill with one industry
expert, who spoke to MNI after the announcement.
     Nicolas Vernon, senior fellow at the influential think-tank Bruegel, agreed
with Giegold that the plans needed revisiting.
     "I think it would be appropriate for the parliament to insist on more
direct powers. There should be more direct accountability to parliament, that's
one thing," Vernon told MNI. He also warned that under current plans the
"executive board is too subordinated to the supervisory board", risking its
     Without reform of the proposal in the legislative process, this could
scupper plans. Parliament and member states will have to approve the draft
before it becomes law.
     Vice-President in charge of financial stability, Valdis Dombrovskis, told
journalists Wednesday that the EP would still "play an important role".
     If the plans pass, ESMA in particular would be granted further
competencies, including direct supervisory powers on critical benchmarks, data
reporting services, market abuse cases and company prospectuses.
     Investment funds carrying an EU label would also be directly supervised and
authorized by ESMA.
     The proposals stop short of the so-called "twin peaks" model which would
see market conduct supervision split from prudential supervision. Some have
suggested that this would best be achieved by merging the EBA, whose rehousing
currently up for grabs among member states due to the Brexit vote, with one of
the other supervisory arms.
     Dombrovskis would not be drawn on what the plans meant for the EBA's
relocation, but they certainly stop short of any merger at this stage.
     The Commission reaffirmed its view that "a single European capital markets
supervisor will ultimately be necessary".
     "What we are doing at this stage is a very modest step in that direction,"
Dombrovskis said.
     Funding changes would be rolled out for ESMA and the other ESAs if the EC
has its way, involving tapping industry and market participants for the majority
of the cash.
     Currently 40% of funding for ESAs comes from the EU budget, topped up with
60% from national authorities. The EC believes this 60% would be better provided
by the financial sector itself, spread in a way to reflect the size and
importance of the players involved.
     But the EC is keen to stress that this would "not necessarily" mean
increased burdens on the sector, given that the contributions provided by
national supervisors at present are already financed by the financial sector.
     An EU official familiar with the proposal said that the ESAs will have more
expenditure, but denied it would give them "carte blanche" to increase budgets.
     "It will be more than today, but still subject to public sector controls
and accountability," he said.
     Giegold told MNI he worried that the new funding model risked too much
private sector influence.
     Stakeholders, including private financial institutions, will have the right
to "send a reasoned opinion" to the EC is they believe an ESA has exceeded its
     "You pay more private sector fees, but then the stakeholder groups where
you have many private sector representatives receive de facto decision-making
power. And that is unacceptable," Giegold told MNI.
--MNI London Bureau; tel: +44 203-586-2225; email:
--MNI Brussels Bureau; +44 203-865-3851; email:
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MNI London Bureau | +44 203-865-3812 |

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