EU executive agencies are regularly thrashed by European legislators seeking to make a point on policy. The Paris-based European Securities and Markets Authority (ESMA) has been a notable exception. It has avoided nasty run-ins with legislators, even where there have been major differences in opinion on implementing financial services legislation. Until now.  

At issue are the highly-contentious implementing measures for the highly-contentious MiFID 2 and MiFIR legislation. ESMA is responsible for drafting the bulk of MiFID 2 and MiFIR implementing measures, which as technical standards must be adopted by the European Commission. Technical standards are then subject to scrutiny by the European Parliament and the Council of Ministers. Either institution may reject technical standards by majority or qualified majority respectively and send ESMA back to the drawing board. ESMA is behind schedule with MiFID 2 and MiFIR technical standards, having agreed a side deal with the Commission to submit unofficial drafts for the executive to review and provide edits in advance of formal submission by the end of September.  

Members of the Parliament’s Economic and Monetary Affairs (ECON) committee responsible for MiFID 2 and MiFIR are unhappy with this arrangement. They are also most displeased with ESMA’s refusal to share working documents on the technical standards. This was evident at the 16 June ECON committee meeting attended by representatives of the Commission and ESMA including Chair Steven Maijoor. This was reiterated in an unusually-critical letter from ECON chairman Roberto Gaultieri MEP (S&D, Italy) to Maijoor dated 25 June.

In recent days an influential ECON member has made feelings crystal clear. In widely-circulated correspondence the legislator threatens “serious trouble” should ESMA not provide working documents to the committee or involve legislators in the drafting process. The correspondence goes on to suggest the committee may bring ESMA to heel through either the review clause in the ESMA Regulation or by crimping the authority’s budget.

Maijoor is expected to be hauled before the ECON committee again in the coming weeks. Whether sabre-rattling from the committee will be effective is unclear. The Commission has many priorities ahead of reporting on the activities of the European supervisory authorities under the review clauses. The budget threat will be taken seriously given recent experience but making good on this threat with ESMA would be politically costly for the Parliament. Involving European legislators more in drafting technical standards may add transparency but it is unlikely to produce elegantly drafted solutions given divisions within the committee and is certain to delay the implementation process.