Europe's six largest economies are moving to centralize financial market supervision at the EU level in a power grab that threatens Dublin and Luxembourg's status as financial hubs.
A leaked proposal dated April 30th from Germany, France, Italy, Spain, the Netherlands, and Poland—the so-called "E6 group"—calls for the Paris-based European Securities and Markets Authority (ESMA) to become "a true European supervisor," taking over powers currently held by national regulators.
The Dutch-Italian proposal, reported by The Irish Times, would grant ESMA oversight of "significant" central securities depositories and clearing houses—the critical financial infrastructure that processes billions in daily transactions.
National authorities would keep supervision of smaller bond depositories and clearing houses, but the big-money operations would answer to Brussels. Or rather, to Paris, where ESMA is headquartered.
That's precisely what worries Ireland and Luxembourg. Both countries have built thriving financial services sectors by offering light-touch regulation—sorry, I mean "business-friendly regulatory environments"—that attract investment funds, banks, and asset managers. If those firms need to relocate closer to their new supervisor in Paris, Dublin and Luxembourg City lose their competitive advantage.
The proposal includes a gradual transition period and comprising national and European regulators to coordinate decisions. Central banks would retain duties, but strategic authority would shift upward.
