16th Nov 2019


Brexit row delays financial products transparency review

  • Should data about financial products from the UK be included in an EU review, when the UK is about to leave? (Photo: Gordon Williams)

The uncertainty caused by Brexit has led to disagreement between the European Commission and its Paris-based financial regulatory body, about the usefulness of carrying out a review of financial products transparency.

The European Securities and Markets Authority (ESMA) has proposed to wait until the UK has left the EU, but the commission has told the authority it should carry out the review "as a matter of urgency", letters published this week reveal.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 year's of archives. 30-day free trial.

... or join as a group

  • ESMA chairman Steven Maijoor (r), in 2017 with EU financial markets commissioner Valdis Dombrovskis. (Photo: European Commission)

ESMA was put in place in 2011 as an EU financial markets watchdog in response to the financial crisis of 2007 and 2008.

One of the post-crisis measures was to require more transparency in the financial system.

A technical EU regulation adopted in 2016 set thresholds determining the level of transparency for certain financial products.

It also gave ESMA the tasks to carry out annual reviews of how the transparency requirements for bonds and derivatives were working out, and whether the thresholds needed to be adjusted.

ESMA was supposed to have submitted its review by 30 July.

Instead, its chairman, Steven Maijoor, wrote to the commission saying that the review should be postponed because of the UK's departure from the EU, or Brexit.

Maijoor argued, in a letter dated 17 June, that "the remaining uncertainties regarding the timing and conditions of Brexit do not allow for an adequate assessment at this point in time".

Brexit originally was supposed to take place on 29 March, but was then postponed two times. The current planned exit date is 31 October.

The UK's capital, London, is such an important financial hub that including it in the review or not would greatly affect the outcome, Maijoor wrote.

The outcome of the review will inform whether transparency rules for certain financial products must be tightened.

"Including or excluding UK data from the assessment would have a fundamental impact on the results and any decision whether to include UK data would depend on whether the UK is still a member of the [European] Union at the time any legislative change would take effect," said Maijoor.

"Moreover, Brexit will in all likelihood affect liquidity in bond and derivatives markets and the value of the assessment will be limited when conducted before these effects have materialized."

"Therefore, ESMA does not consider that this is a suitable time for performing the assessment and for potentially tightening the transparency rules in RTS 2 [the regulation in question]," Maijoor concluded.


The commission disagreed, however.

It sent ESMA a letter dated 1 August, saying that the review was all the more necessary - because of Brexit.

"Contingency planning for a withdrawal of the UK from the MiFID II framework requires that ESMA undertake the review of the transparency requirements for non-equity instruments as a matter of urgency," wrote Olivier Guersent, the highest-ranking civil servant at the commission's financial department.

MiFID is short for Markets in Financial Instruments Directive. It is one of the key pieces of EU legislation adopted to strengthen the framework for the regulation of markets in financial instruments.

Guersent wrote that ESMA "should provide the European commission with trajectories" that would allow the commission to compare scenarios with and without the UK.

"This data is necessary in order to form a view on whether the timelines for the phase-in provisions in RTS 2 would significantly differ from those initially anticipated," said the commission letter.

ESMA did not want to comment, but it can be expected that it needs some time to decide on its next move.

However, the clock is ticking, with only 83 days to go until Brexit.

EU banks more vulnerable to shocks than feared

Eurozone banks, such as Deutsche Bank, might be much more vulnerable to a repeat of the 2008 financial crisis than EU "stress-tests" have said, according to a new audit.

EU and China agree to defend 'gastronomic jewels'

Manchego cheese, Panjin rice and Polish vodka will all be protected under a new EU-China agreeement. But the two trading giants continue to struggle over other trade-related deals.

News in Brief

  1. Catalan politicians extradition hearing postponed
  2. Germany: EU banking union deal possible in December
  3. EIB: no more funding of fossil-fuel projects
  4. UK defence chief: Russia could trigger World War III
  5. Hungary's Varhelyi will face more questions
  6. Police put former Berlusconi MEP Comi under house arrest
  7. MEPs criticise Poland for criminalising sex education
  8. UK will not name new commissioner before election


Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  2. Nordic Council of MinistersNordic Climate Action Weeks in December
  3. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  4. Nordic Council of MinistersBrussels welcomes Nordic culture
  5. UNESDAUNESDA appoints Nicholas Hodac as Director General
  6. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  7. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  8. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  9. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  10. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues
  11. Nordic Council of MinistersNo evidence that social media are harmful to young people
  12. Nordic Council of MinistersCanada to host the joint Nordic cultural initiative 2021

Latest News

  1. Key moments for new commission This WEEK
  2. EU threatens legal action against UK over commissioner
  3. Corruption in the Balkans: the elephant in the room
  4. Green MEPs unconvinced by Romanian commissioner
  5. EU states fell short on sharing refugees, say auditors
  6. Hungary's commissioner-to-be grilled over loyalty to Orban
  7. Widow's plea as EU diplomats debate Magnitsky Act
  8. Leftist MEPs call on EU to address crisis in Chile

Stakeholders' Highlights

  1. Vote for the EU Sutainable Energy AwardsCast your vote for your favourite EUSEW Award finalist. You choose the winner of 2019 Citizen’s Award.
  2. Nordic Council of MinistersEducation gets refugees into work
  3. Counter BalanceSign the petition to help reform the EU’s Bank
  4. UNICEFChild rights organisations encourage candidates for EU elections to become Child Rights Champions
  5. UNESDAUNESDA Outlines 2019-2024 Aspirations: Sustainability, Responsibility, Competitiveness
  6. Counter BalanceRecord citizens’ input to EU bank’s consultation calls on EIB to abandon fossil fuels
  7. International Partnership for Human RightsAnnual EU-Turkmenistan Human Rights Dialogue takes place in Ashgabat
  8. Nordic Council of MinistersNew campaign: spot, capture and share Traces of North
  9. Nordic Council of MinistersLeading Nordic candidates go head-to-head in EU election debate
  10. Nordic Council of MinistersNew Secretary General: Nordic co-operation must benefit everybody
  11. Platform for Peace and JusticeMEP Kati Piri: “Our red line on Turkey has been crossed”
  12. UNICEF2018 deadliest year yet for children in Syria as war enters 9th year

Join EUobserver

Support quality EU news

Join us