The EU’s top markets supervisor has warned that he needs tougher powers to police the risks created by asset managers and other investment firms relocating to the continent after Brexit.
Steven Maijoor, the chairman of the European Securities and Markets Authority, said the EU should give him a stronger mandate to forge common supervisory standards across the bloc in a bid to avoid companies heading to the countries with the laxest standards.
“It is essential that national regulators do not compete on regulatory and supervisory treatment,” he said, adding that experience has shown the existing powers available to ESMA to forge common, rigorous supervisory standards are “too weak.”
“Now, it is high time to strengthen the instruments to support supervisory consistency across the EU,” he said.
Speaking at a conference in Brussels, Mr Maijoor said Brexit-driven relocation presents specific risks to the EU.
One, he said is that firms may try to game the system by establishing a legal presence within the bloc, while then “outsourcing and delegating” activities back to London – effectively getting market access by the back door.
Mr Maijoor said that one possibility would be to hand ESMA a more direct role in granting the authorisations firms need to establish themselves in a particular country.
Regulators are already examining “potential limitations” that could be placed on such outsourcing, he said.
Fears of a regulatory “race of bottom” where companies seek out relatively lighter-tough supervisors have been stoked by Ireland, which has complained that rival financial centres, notably Luxembourg, have resorted to “regulatory arbitrage” in a bid to attract business.
Speaking earlier at the same conference, Valdis Dombrovskis, the European commissioner in charge of financial services policy, said that policymakers are weighing possible “targeted changes to the powers of ESMA.”