Governments have agreed a deal to centralise more oversight of financial markets at European rather than national level, ending years of deadlock that had stalled the key reforms.
Tánaiste and Minister for Finance Simon Harris said the agreement would represent the biggest overhaul of the EU’s market for capital in “decades”, making it easier for funds and investment to move across national borders.
The proposed changes will shift responsibility for regulating the architecture underpinning financial markets from national central banks and authorities to a European body.
The reforms will expand the remit of the Paris-based European Securities and Markets Authority (ESMA), a step seen as necessary to align the union’s 27 national markets closer together. Politicians hope the changes will allow more businesses to expand on a European scale.
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Officials from the 27 member states have spent months fighting over the scope of the changes.
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Ireland and Luxembourg have traditionally opposed attempts to centralise oversight of financial markets at European level.
However, because Ireland holds the rotating Council of the EU presidency, a deal-making role in the Brussels political system, the Irish Government has been responsible for negotiating a compromise a majority of member states will back.
“We’ve been talking about this for a hell of a long time. We’ve been talking about deepening capital markets union, completing the single market for decades,” Harris said on Friday.
A large majority of the union’s finance ministers gave the thumbs-up to the complex financial reforms at a meeting in Luxembourg.
Harris, who chaired the discussion, said the agreement represented “the biggest move in decades”, creating a bigger pool of finance businesses could tap into.
“When Europe deepens its capital markets, everybody benefits. When you grow the size of the pie, there is more pie to go around,” the Fine Gael leader said.
The European Commission, the EU’s executive arm that proposed the reforms, sharply criticised how the draft legislation had been watered down by national governments.
“We deeply regret that the compromise now on the table falls significantly short of the level of ambition needed,” Maria Luís Albuquerque, European commissioner for financial services told ministers on Friday.
The most contentious changes, negotiated by the Irish presidency, exclude key financial players from the scope of EU-level oversight. This decision to accommodate “narrow national considerations” undercut the thrust of the reforms, the commissioner said.
The compromise will mean Deutsche Börse Group, who run the Frankfurt Stock Exchange, and three other large trading venues, will remain regulated at national rather than EU level.
The German government argued a carveout was justified on the basis Deutsche Börse only operated in Germany, rather than across EU borders.
Belgium and several other member states, and the commission, were unhappy at the perceived special treatment shown to the German trading exchange.
Speaking to reporters before the meeting, Harris defended the outcome of the negotiations. “It is a compromise proposal. It is the [Irish] presidency’s best assessment of what can bring people with us,” he said.
“If any one of us was sitting down and writing this deal on our own, you’d have a different deal but that’s not how the European Union works, we’re 27 member states,” he said.
At the start of Ireland’s six-month EU presidency in July, Harris said he wanted to secure a capital markets deal by early October, a timeline many politicians and industry figures viewed as overly ambitious.
The Government will now represent the compromise agreed by member states in negotiations with the European Parliament, where MEPs are expected to push for their own revisions and changes before the reforms become law.
