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Brexit won’t derail EU’s goal of transparent financial markets

The EU's regulatory plans to create a level playing and strengthen investment in securities markets won't be knocked off track by Brexit. This message was clear in a speech given by the executive director of the European Securities and Markets Authority (ESMA). Verena Ross began her speech – given in Oslo – by praising the EU's Capital Markets Union initiative, although she alluded to Britain's vote to withdraw from EU membership when she said that, while she “would have preferred to do this with 28 Member States, I think that what we could do with 28, we should definitely do with 27.”

The speech emphasised the importance of mutual collaboration between the EU and non-member states that are part of the EU Single Market (such as Norway). It focused largely on the issue of investor protection in Europe, which will help to nurture securities markets in the EU. This is of course good news for corporates looking to secure financing.

The talk touched on subjects such as:

  • disclosures and the Packaged retail and insurance-based investment products (PRIIPS);
  • the role of distribution and MiFID; and
  • the importance of supervisory convergence.

Need for more transparency

Regarding the treatment of financial instruments, Ross said that transparency needed to be increased to protect investors and ensure that asset managers and end-investors are helped by a well-functioning intermediation process. She said that the Markets in Financial Instruments Directive (MiFID II) will have a big impact on the distribution landscape including:

  • the need for retail investors to seek advice in order to access financial instruments deemed complex;
  • the cost of investment advice;
  • more transparency on fees; and
  • a ban on inducements in the event of independent advice.

Automated advice

As Ross said that “advice will become more standardised and generic”, which will lower costs for investors, she alluded to the possibility of automated advice for investors and greater adoption of new technologies to improve the investment process. She also mentioned ESMA's core activities of working towards supervisory convergence, which she said will “help us to achieve a level-playing field”.

High-quality data

The concluding remarks addressed the need for high-quality data in Europe's securities and financial markets, which is needed to assess risks and is “essential” at both national and European level – but she called for greater convergence between EU nations to improve the quality of data. Under MiFID, some member states have mandated ESMA to gather data on their behalf. Ross said: “ESMA will provide a central facility in relation to reference and trading data and the calculation of the comprehensive MiFIR transparency parameters. This project will allow us to collect data in a more efficient and harmonised manner across Europe, thereby achieving important economies of scale and lowering costs for industry and taxpayers, and publish all transparency parameters and reference data on financial instruments in a one-stop shop.”


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Financing Short-Medium Term Deficits

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