EFAMA supports the majority of measures but warns against new ESMA supervisory reviews for large asset managers
Today, the European Commission released its expansive market integration package, which addresses numerous areas including cross-border barriers to fund distribution and intra-group operations, supervision, capital market infrastructure, consolidated tape, tokenisation, and many more. This involves reopening almost all the main legislations for asset management and financial services more broadly, including the UCITS and AIFM Directives, MiFID/MiFIR, EMIR, CSDR and the Cross-Border Distribution of Funds Regulation (CBDFR), as well as amending the ESMA Regulation.
Identifying and removing barriers to increased integration of EU capital markets is a critical part of the Savings and Investment Union (SIU) plan, which aims to boost retail investment and grow EU capital markets. Subject to a more detailed analysis, the Commission’s package includes positive elements that will further these goals and some that raise concerns or additional questions.
Tanguy van de Werve, EFAMA Director General, commented: “The Commission’s package contains several promising measures that can help deliver more efficient and integrated EU capital markets. We particularly support the focus on removing cross-border barriers, enhancing supervisory convergence, and encouraging digital innovation. However, some proposals raise questions that will require careful consideration to avoid adding new layers of complexity and make sure that long-term benefits offset short-term adjustment costs for market participants. Getting this balance right is crucial for building a strong Savings and Investment Union.”
Eliminating cross-border barriers for funds
While the Single Market for funds works relatively well, asset managers still face unnecessary barriers when distributing funds across EU borders, driving up costs and adding complexity. EFAMA commends the Commission’s efforts to tackle these obstacles. In particular, we support proposals to streamline cross-border fund approvals, harmonise fund authorization processes, and limit additional requirements from Member States, such as those for marketing materials. If implemented pragmatically and with a genuine focus on simplification, these measures could help advance the goals of the Savings and Investment Union.
EU intra-group arrangements
To address concerns that delegation rules have resulted in excessive red tape, the Commission proposes excluding EU intra-group arrangements from the delegation regime. While we welcome the ambition to simplify the regime, this change might not deliver substantial efficiency gains, as management companies are likely to continue complying with the risk-management principles outlined in the UCITS/AIFMD framework because they remain legally liable for any material management mistakes.
Supervisory framework
EFAMA has long advocated against central supervision for asset managers, as the current system proved its efficiency and this would risk adding layers of complexity for little gain. We are therefore pleased that the Commission’s proposal does not include direct ESMA supervision or supervisory colleges for asset managers and focuses instead on strengthening ESMA’s convergence powers and toolkit. The proposal tasks ESMA with identifying and addressing cross-border barriers, gives the authority additional resources, and introduces a legal obligation for ESMA to use tools such as breach of Union law procedures when necessary.
On the other hand, the proposal introduces annual reviews of large asset managers by ESMA. We are deeply concerned that these reviews will allow ESMA to second-guess the decisions of national supervisors. This would introduce legal uncertainty for these asset managers under review, as ESMA could challenge supervisory decisions made by national authorities. Considering that asset managers are well-regulated and there have been no significant supervisory failures, the objective or added benefit of these reviews is unclear.
We believe that ESMA's ongoing work to establish an EU supervisory data space could greatly enhance the supervisory framework and benefit the industry as a whole. By eliminating duplicative reporting for cross-border asset managers, we could make great progress toward creating a Savings and Investment Union and increasing the competitiveness of EU capital markets. This project will require significant time and resources from ESMA and national supervisors to implement effectively, and we believe it should be regarded as a top priority.
Marin Capelle, Regulatory Policy Advisor at EFAMA, commented: “When it comes to EU supervision, strengthening ESMA’s tools to address cross-border issues is the right approach—but it is equally important to avoid introducing indirect forms of central supervision that could create legal uncertainty for asset managers. Policymakers need to be vigilant that proposals lead to positive market outcomes and do not inadvertently add complexity.”
Capital market infrastructure
Looking beyond asset management specific issues, the Commission’s package also includes much welcome improvements to the EU’s consolidated tape for equities/ETFs, which will ensure more useful data for investors (both EU and global) and drive broader take-up of the tape from the outset. This includes having 5 layers of best bid and offer on the pre-trade tape and venue attribution for every quote. This development would give an important boost to Europe’s fragmented capital markets. EFAMA is very pleased to see the Commission show leadership on this important market structure reform.
We are equally impressed with proposals that promote greater transparency and competition when it comes to access and choice of CCPs for clearing, and improvements in cross-border settlement through CSD links and T2S connectivity.
Digital innovation
The Commission has demonstrated a real commitment to growing the digital asset ecosystem in Europe. Proposals to amend the DLT Pilot regime, the MiCA Regulation, and other relevant legislation would provide legal clarity to market participants and encourage innovation in financial services. We are particularly pleased to see provisions that uphold the principle of technology neutrality, broaden the scope of the DLT Pilot regime, and clarify the use of electronic money tokens.
Susan Yavari, Deputy Director at EFAMA, commented: “The package we have seen today represents a great leap forward, adapting the EU’s legal framework for the next phase of digital asset deployment. This is great news whether you are a traditional finance player or a fintech. The European Commission’s vision for a DLT-based economy is unequivocal and well-received. What matters now is speed. The DLT part of the package should be fast-tracked through the legislative process. Market participants need this clarity asap.”
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Notes to Editors
Access the European Commission’s market infrastructure package here.
Read our original policy paper on SIU market integration here.
For further information, please contact:
Hayley McEwen
Head of communications and membership development
