Germany and five other biggest EU economies back centralised market supervision

Germany and Five Major EU Economies Back Centralised Market Supervision

By Jan Strupczewski

EU's Push for Centralised Capital Markets Supervision

Germany Drops Objections to Centralised Supervision

BRUSSELS, March 12 (Reuters) - The European Union's six biggest economies have come out in support of centralised capital markets supervision in the EU as Germany dropped its objections, a letter from six finance ministers shows.

Germany, France, Italy, Spain, Poland and the Netherlands said in a letter seen by Reuters on Thursday that they backed the idea of centralised supervision to provide impetus to work on the EU's Savings and Investments Union, which has been dragging on for more than a decade.

Implications for EU Investment and Market Integration

The shift by Berlin is likely to help break the deadlock over creating more integrated capital markets, the lack of which governments say has been holding back EU investment, innovation, better pension systems and a bigger international role of the euro currency.

European Commission's Proposal for Supervision

To help capital flow between the 27 EU countries, the European Commission proposed last December, among other things, to centralise supervision of significant cross-border trading venues, central counterparties, and crypto-asset service providers.

Previous Reluctance from Member States

Germany, as well as Luxembourg, Ireland and some other EU countries used to be reluctant to the idea, wary of handing over national oversight of their financial institutions to the European Securities and Markets Authority in Paris.

But the letter by the six finance ministers, dated March 11, showed Berlin has changed its stance.

Statement from the Six Finance Ministers

"We support improving the convergence and efficiency of the supervision of capital markets across the EU, moving toward centralised supervision for the most systemic relevant, cross border financial market infrastructures while avoiding unnecessary duplication or additional costs and ensuring that supervisory responsibility and fiscal accountability go hand in hand," the six ministers said.

The letter was addressed to the European Commission, the head of euro zone finance ministers and the Cypriot presidency of the EU, which will drive negotiations on the issue.

Next Steps and Broader Commission Proposals

The six ministers, whose countries jointly account for around 95% of EU capital markets, said they wanted EU governments to reach a joint position on the Commission's proposals by mid-year. Once all governments have a common position, the Commission proposal can be negotiated with the European Parliament, which could take another six to 12 months.

Additional Elements of the Commission's Package

Apart from supervision, other elements of the Commission's package proposal from last December included setting up a Pan-European Market Operator Status to allow operators to manage many EU venues without additional local licenses.

It also proposed to harmonize financial services rules across the EU and amended the Central Securities Depository Regulation and European Market Infrastructure Regulation to reduce costly, fragmented and duplicated processes.

The Commission's package also proposed updates to the EU's Digital Ledger Technology (DLT) laws to encourage innovation, including simplified authorization for small DLT operators and a streamlining of cross-border operations of investment funds.

(Reporting by Jan Strupczewski; Editing by Susan Fenton)