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EFAMA has published its response to the European Commission’s targeted consultation on the supervisory convergence and the Single Rule Book, focusing on three areas for improvement.  

Since its creation a decade ago, ESMA has played an increasingly important role in regulating EU capital markets by fulfilling its direct supervisory, regulatory and coordination mandates. As far as asset management activities are concerned, EFAMA believes ESMA’s track record can be further improved through more efficient and effective use of ESMA’s existing powers. 

EFAMA have identified three main areas for improvement that would further strengthen ESMA’s role at the centre of EU capital markets. 

More time to prepare technical standards and guidelines: Given the urge to adopt new legislation in light of prevailing political priorities, ESMA is often not given enough time to consult both its own members and external stakeholders on very technical matters to a sufficient degree. As a result, ESMA’s Level 2 or Level 3 outputs are not always thorough, nor clear, leading to divergent interpretations between NCAs and market participants alike. Accompanying this is the excessive granularity of some Level 1 requirements – to the extent that ESMA cannot define critical technical details. 

Ensure better synchronisation between Level 1, 2 and 3 acts: For ESMA to gain greater experience and credibility vis-à-vis EU capital market players, better synchronisation of the legislative process particularlybetween the European Commission (Level 1) and ESMA’s Level 2 and Level 3 work is critical. This can be achieved by allowing longer timelines or avoiding hard dates at Level 1 (instead include wording such as ‘Level 1 to come into effect 6 months after the RTS has been approved’). In this context, EFAMA also strongly calls for ESMA to exercise regulatory forbearance powers in the form of “no-action letters” by allowing NCAs and firms to temporarily waive (Level 1) requirements that are incomplete in the absence of implementing acts or guidelines, which has been a successful practice in the United States. 

Focus on supervision and enforcement rather than (new) regulation: EU rules cannot and should not be amended continuously. ESMA should allow NCAs to share their experiences and best practices in enforcement cases, and possibly even coordinate between them as EFAMA believes that ESMA’s authority can only be further strengthened here. In addition, supervisory and regulatory convergence through the ESAs is a crucial factor to ensure comparability and a regulatory level-playing field across the Member States and to deliver the ambitious Capital Markets Union.