The legislative review of the European Commission’s September 2017 proposal for a Regulation amending the Regulations establishing the European Supervisory Authorities and other select European legislative acts (ESAs review proposal) is ongoing. As previously mentioned proposed amendments to select European legislative acts aim to reform the governance arrangements of the ESAs and strengthen their supervisory powers, in particular the competences of the European Securities and Markets Authority (ESMA). The proposed amendments quickly proved controversial in particular amongst the Member States. This week, on 23 May, Member States’ representatives met for another working group meeting to continue discussions on the legislative proposal. Hosted by the Bulgarian Presidency of the Council the meeting was scheduled to address a number the most controversial elements of the proposal, including the ESAs’ tasks, powers and governance as well as expansion of the direct supervisory role of ESMA.

In respect of the latter, the Bulgarian Presidency notes the opposition of Member States to the Commission’s proposal to establish ESMA as a supervisor for European Venture Capital Funds, European Social Entrepreneurship Funds and European Long-Term Investment Funds. In the light of this, the Presidency proposed to remove the select amendments from the draft legislation. Similarly, in respect of the proposed amendments to the Prospectus Regulation the Presidency notes Member States’ concerns expressed during the preceding discussions and suggests to delete the proposed amendments from further consideration. At the same time the Presidency seeks Member States views on alternative solutions in respect of wholesale and third country prospectuses. With regards to the proposed amendments to the EU Benchmarks Regulation (BMR) regarding direct ESMA supervision of critical and third country benchmarks, the Presidency put forward two options for Member States’ consideration. This included maintenance of the current regime as established under the BMR, or proposing targeted amendments to the Commission’s proposal, which would limit the scope of critical benchmarks under the direct ESMA supervision. Finally, in respect of the proposed amendments to MiFID II and MiFIR regarding the supervision of data reporting service providers (DRSPs), the Presidency proposes three options for further review. These include keeping MiFID II regime with no changes, leaving the supervision of APAs and ARMs with only domestic-level operations to national competent authorities or establishing ESMA as direct supervisory authority for all DRSPs as per the Commission’s proposal.

While no breakthrough in discussions is expected over the coming weeks, the Bulgarian Presidency still aims to advance the legislative review amongst Member States sufficiently to allow the forthcoming Austrian Presidency to adopt a general approach. Given the European Parliament’s election calendar in 2019, substantive discussions between the co-legislators must conclude by early 2019 at the latest if the legislative proposal is to be adopted in this parliamentary term. The European Parliament’s Economic and Monetary Affairs (ECON) committee is expected to adopt its report in September 2018. Depending on progress in the Council, this could allow co-legislators to begin trilogue negotiations in October 2018.