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French market regulator proposes ESMA reforms

French market regulator Autorité des marchés financiers (AMF) has proposed three changes to European Securities and Markets Authority (ESMA) decision making.28 Jun 2017

In its response to a European Commission consultation on the operations of the European Supervisory Authorities for banking (EBA), insurance (EIOPA) and financial markets (ESMA) the AMF has chosen to focus on the functioning and the powers of ESMA, as "the pillar of harmonised interpretation of European legislation and of a common culture of supervision in Europe", it said.

ESMA should extend the qualified-majority voting system for all important decisions on its board of directors, change the appointment procedure for the ESMA board of directors, and allow permanent members to sit on the management board alongside representatives of national authorities that sit on a rotating basis, the AMF said.

The AMF has also suggested a change to the financing of ESMA, with greater industry involvement based on the size of the financial industry in each EU country.

ESMA's role should be extended to allow further intervention and on-site inspections when required, it said.

The authority should play a central role in areas including the initial assessment process and monitoring of the equivalence of the regulatory framework of countries outside the EU,  the collection and reliability of data transmitted by financial markets to European supervisors and the direct supervision of data providers under the revised Markets in Financial Instruments Directive, direct supervision of critical benchmark administrators, and direct supervision of central counterparties, the AMF said.

Banking regulation expert Michael Ruck of Pinsent Masons, the law firm behind Out-Law.com said: "The AMF’s proposal supports an increasingly centralised approach to financial services regulation within the EU. Only time will tell if the various members of the EU are able or willing to support such a common approach to issues which are often defined by the jurisdictions or territories in which they exist. One example of which is how the different member states of the EU approach whistleblowing and the type of culture that is encouraged within financial services firms in these different states."