European Central Bank President Christine Lagarde has proposed giving more powers to the European Union’s securities watchdog, making it the regional equivalent of the US Securities & Exchange Commission.
Oversight of capital markets “remains largely at the national level,” Lagarde said in a speech at a conference on Friday. A European agency with a “broad mandate including direct supervision,” could help address that problem.
“Creating a European SEC, for example by extending the powers of ESMA, could be the answer” she said, referring to the European Securities and Markets Authority.
The EU is working to strengthen links between its financial markets and make it easier for investors to deploy capital to finance the overhaul of the region’s economy. While Paris-based ESMA has led the implementation of certain projects including the bloc’s Mifid rules, it lacks the broad enforcement powers of other European authorities such as the banking supervision arm of the ECB.
Lagarde cited the challenges of de-globalisation, demography and decarbonisation and compared the financial needs to the investments in American railways in the 18th century, which exceeded the lending capacity of banks. Drawing another comparison to American history, Lagarde said the creation of the SEC in the 1930s “played a pivotal role in suppressing state efforts to fragment securities markets.”
The EU will also need a “single rulebook” for its financial markets, she said. Combined with a unified watchdog, “this would enable private entities to expand their ambitions in fostering high-growth private investments.”