ESMA backs CMU project despite Brexit vote

The European Securities and Markets Authority (ESMA) has thrown its support behind the Capital Markets Union (CMU) project in spite of the UK’s decision to leave the European Union.

The CMU action plan was proposed almost 12 months ago and prioritised increased investor opportunities, a single market for all member states and more resilience and competition within the financial system.

In a speech made at the Finanstilsynet conference in Oslo, ESMA executive director Verna Ross urged that the project should continue in spite of Brexit.

“The CMU initiative builds further on a history of creating welfare by integrating our economies,” said Ross.

“I wholeheartedly support that initiative and whilst I am very open about the fact that I would have preferred to do this with 28 member states, I think that what we could do with 28, we should definitely do with 27.”

Global Custodian investigated the current state of the CMU project in July following the UK’s decision to leave the European Union at the end of June.

Material changes to the CMU are likely to occur as a result of Brexit, with EU policymakers and regulators likely to devote resources to managing the aftermath of Brexit.

Representatives from the UK may also be side-lined in CMU developments, with EU officials likely to encourage more euro-denominated trading and clearing activities to decamp from London to other areas of the bloc.

In a communication from the European Commission (EC) to the European Parliament and the European Central Bank in September, the EC called for the first initiatives of the CMU action plan to be implemented immediately.

Ross also stressed the need for increased oversight and consistency in the implementation of CMU proposals.

“I am very happy that the European Commission confirmed last month its commitment to the CMU project through the publication of a progress report accelerating some reforms,” said Ross.

“But there is also a clear need for more consistent implementation and stronger supervision, to support investor 3 protection, orderly markets and financial stability.”

The EC has already revealed plans for a mid-term review of the project in 2017 in which it aims to take into account the “changing political context” alongside other priority areas.