The European Commission is preparing to unveil sweeping reforms to strengthen the supervision of Europe’s financial markets, with new plans to centralize oversight of stock exchanges, crypto platforms, and clearing houses. The initiative aims to reduce regulatory fragmentation, cut cross-border costs, and boost the EU’s competitiveness against the United States.
Toward a Unified Financial Market
At the heart of the proposal is an effort to advance the long-delayed Capital Markets Union (CMU) — a project intended to make it easier for European businesses to access funding and expand within the continent. Under the current system, dozens of national regulators and hundreds of local exchanges and clearing entities govern the EU’s financial markets, leading to higher costs and inefficiencies for cross-border investment and trading.
The Commission’s plan, expected to be presented in December as part of a “Markets Integration Package,” would expand the powers of the European Securities and Markets Authority (ESMA), the Paris-based regulatory body responsible for ensuring stable and transparent markets across the bloc.
According to officials briefed on the discussions, ESMA’s new remit would include direct supervision of “the most significant cross-border entities” — such as large stock exchanges, crypto asset service providers, and post-trade infrastructure like central clearing counterparties and central securities depositories.
A Step Toward an EU ‘SEC’
The reform draws inspiration from the U.S. Securities and Exchange Commission (SEC) model, which oversees American capital markets under a single federal authority. Supporters, including European Central Bank President Christine Lagarde and her predecessor Mario Draghi, argue that stronger EU-level supervision is crucial to fostering investor confidence and attracting global capital.
Draghi, in a 2023 report on European competitiveness, emphasized that fragmented oversight limits Europe’s ability to scale innovative companies compared to the U.S., where capital markets are more unified.
Under the plan, ESMA would also gain the power to settle disputes between major asset managers. While national regulators would retain day-to-day supervisory duties, ESMA’s decisions in cross-border disputes would be binding, reinforcing its authority as a continental arbiter.
Political and Industry Pushback
The proposal, however, faces resistance from several EU member states concerned about losing regulatory autonomy. Germany, which has historically opposed centralized market supervision, has shown new willingness under Chancellor Friedrich Merz to explore cooperation with France, a strong advocate for deeper financial integration.
In contrast, Luxembourg and Ireland, both key financial centers, remain sceptical. “We would like to have convergence rather than creating a costly and ineffective centralised model,” said Gilles Roth, Luxembourg’s finance minister. Smaller countries fear that decisions made by a Paris-based authority could disproportionately favour larger economies and undermine local financial sectors.
Industry groups have also voiced concern. A European exchange operator told the Financial Times that shifting oversight of crypto service providers to ESMA would increase compliance burdens and costs without clear benefits. Marin Capelle, policy adviser at Efama, the European fund industry association, warned that “expanding ESMA’s supervisory responsibilities would mean higher fees paid by the industry.”
Balancing EU Integration with National Expertise
In a statement, the European Commission said it is “still exploring the potential of EU-level supervision for critical infrastructures,” including clearing houses, depositories, and trading venues. The institution emphasized that any new framework would need to strike a balance between EU-wide interests and national expertise.
The debate marks a pivotal moment for the EU’s ambition to create a unified capital market that rivals Wall Street. While a central supervisor could bring greater consistency and resilience to Europe’s financial system, success will depend on overcoming political resistance from member states protective of their regulatory sovereignty.
