The European Commission (Commission) has put forward a set of amendments to EU financial supervision. In the words of Commission vice-president Valdis Dombrovskis, speaking in Brussels on Wednesday, the aim is to make “cross-border operations easier for companies, more effective to monitor for supervisors, and more trustworthy for consumers”.

Embrace green finance opportunities

The amendments aim to: consolidate the trend of financial integration by completing the Banking Union and the Capital Markets Union; achieve more integrated markets to support jobs and growth and create a more resilient economy for the EU; and also to embrace opportunities arising from the trend towards sustainable and green finance and the rise of fintech. Dombrovskis adds: “Last but not least, finance in Europe is changing due to the departure of the UK from the EU.”

One of the main proposals unveiled by the Commission are some amendments to the role of the EU supervisory authorities (ESAs). In particular, ESMA – the European Securities and Markets Authority – will be given new responsibilities. Dombrovskis explained: “Today, there is almost no EU-level supervision of capital markets. Our proposals would expand EU-level supervision in areas where common supervision is easier for companies operating cross border and more effective for supervisors.”

Meeting sustainability goals

However, the biggest change proposed by the Commission is to increase the role of ESAs in the fight against climate change. Dombrovskis said: “There is a clear and urgent need to mobilise billions of euros in private investment towards green and sustainable goals. This is why we are proposing to require the ESAs to integrate Environmental, Social and Governance (ESG) considerations into all their tasks.”

This will enable the ESAs to monitor how financial institutions identify, report and address risks that ESG factors may pose to financial stability, thereby making financial markets activity more consistent with sustainable objectives. A statement issued by the Commission added that: “Some member states are moving faster than others in harnessing the potential of sustainable finance. It is important to avoid that this leads to financial market fragmentation. In this context, the ESAs can contribute to more coordinated ESG supervision of environmental, social and governance (ESG) criteria across the EU financial sector.”

Amendments were also put forward to ensure that ESAs play a strong coordinating role for national fintech initiatives, such as innovation hubs and regulatory sandboxes, so that EU supervision keeps up with the pace of technological innovation.