Irish officials say a deal has been reached between EU finance ministers on a key element of the proposed Savings and Investment Union (SIU), a set of new rules designed to enhance cross-border investing in order to boost Europe’s competitiveness.
Officials say it is the most significant “win” of the Irish Presidency of the Council of the EU so far.
Tánaiste Simon Harris has hailed the agreement as “a practical step towards a more integrated, competitive and resilient European economy”.
The agreement was hammered out at a meeting of EU finance ministers in Luxembourg this morning, chaired by Mr Harris.
Ministers accepted a compromise text on how deeper cross-border integration in financial services will be supervised at EU level.
The SIU is a key element of the push to lower barriers to cross-border financial services, in order to deepen a pool of capital that can boost Europe’s competitiveness and fund more scale-up champions.
According to the European Commission, an estimated €10 trillion of EU household savings are held in low-yield bank deposits rather than being invested in European capital markets.
The SIU is designed to make it easier for Europeans to invest their savings in the real economy with higher potential returns, and in so doing boost the EU’s overall competitiveness.
In particular, the initiative is aimed at providing more investment capital for SMEs which often struggle to get venture capital financing from banks.
The fragmented nature of EU financial services, where there is limited cross-border investing, is seen as a hindrance to boosting Europe’s competitiveness in the face of geopolitical threats and rivalry.
One of the most controversial aspects is how a more integrated financial services sector would be supervised at EU level.
The Market Integration and Supervision Package (MISP), agreed this morning, will see powers shift from national regulators to the Paris-based European Securities and Markets Authority (ESMA).
Under the proposed new rules, ESMA – which supervises major clearing houses and securities depositories – will have an increase in its powers in order to supervise large cross-border stock exchanges, market infrastructure providers and crypto companies, currently overseen by national regulators.
In a statement, the Tánaiste said that a new full-time and independent Executive Board would be created within ESMA.
He said: “The EU’s long-term prosperity will depend on our ability to innovate, invest, and compete.
“Open, well-functioning and integrated European capital markets are an essential pillar of the Single Market.
“In a world of global competition, Europe’s strength lies in its scale. MISP helps ensure that European savings can better finance European innovation, European businesses and European jobs. MISP is not simply a technical reform of financial legislation.
“The MISP package is a vital step in that direction. It will boost our competitiveness, contribute to improved living standards, and ensure that the EU remains a leading destination for global investment.”
The new legislation will confer direct ESMA supervision over central counterparties, central securities depositories, crypto-asset service providers and trading venues.
However, there will be an opt-in regime for what the statement referred to as “Pan European Market Operators”.
Germany’s Deutsche Börse had sought a carve-out from MISP so that it enjoys a discretion as to whether it comes under ESMA supervision or remains under the control of the German domestic regulator.
Under a common position agreed earlier this year by the six largest EU economies – Germany, France, Italy, Poland, Spain and the Netherlands – there was support for giving ESMA a deeper supervisory role, on the condition that Deutsche Börse would have the discretion to choose.
The European Commission has argued that more centralised supervision would reduce duplication, improve consistency and make it easier for financial firms to operate across borders.
However, some EU capitals have argued that national regulators have important local expertise.
There are also concerns over which supervisor would bear financial responsibility if one or other institution encounters serious difficulties.
Before Ireland took on the rotating presidency, it had expressed concerns that giving more powers to ESMA could undermine the strength of the Irish Financial Services Centre (IFSC).
However, during the Presidency, Ireland has had to assume a neutral position.
Officials say they had worked intensively to forge a common position among member states.
Arriving at the meeting this morning, the Tánaiste conceded that a number of outstanding issues were holding up agreement.
He told reporters: “I really do believe there is an understanding across member states, big and small, of the importance of getting this right. As I say to colleagues regularly, if not now, when? If Europe fails to or decides not to take this decision, what message does this send to the world?”
Asked about Germany’s demand for an exemption for Deutsche Börse, the Tánaiste said: “There aren’t carve-outs here. There are clear criteria, timelines and transition periods, and that again is part of the art of compromise.”
The European Commission argues that fragmented financial markets contributed to a lack of competitiveness, with companies missing out on potential economies of scale and efficiency gains, relative to the United States.
In 2024 the market capitalisation of stock exchanges amounted to 73% of the EU’s GDP, compared to 270% in the US.
