Czech central bank concerned over Esma’s power

The Czech National Bank (CNB) has expressed concern over the balance of power between national supervisors and the European Securities and Markets Authority (Esma).

As one of three new European supervisory authorities, Esma will be responsible for writing many of the detailed rules required by incoming regulations and directives, but it also has some direct supervisory powers – over credit rating agencies, for example – and the CNB says attempts are being made to expand this element of the authority’s role.

“The CNB is concerned about transfer of new competencies to Esma. The CNB does not support transfer of powers to Esma beyond what was already agreed,” says a spokesperson for the central bank in Prague.

In particular, the CNB opposes Esma being granted direct supervisory powers over financial institutions.

“The national supervisor is to remain responsible for day-to-day supervision of financial institutions and we do not see any reason why direct supervisory powers should gradually or radically be given to Esma. The CNB does not support persistent efforts to separate national powers from national responsibilities. This is being tested routinely in new draft legislation that will be to the detriment of the European Union market and its competitiveness,” says the spokesperson.

Attempts to finalise the European Market Infrastructure Regulation (Emir) this month have been repeatedly frustrated by a running battle over the limits of Esma’s power, and specifically what role the authority should play in authorising central counterparties (CCPs) for over-the-counter derivatives markets. In the European Commission’s original draft of Emir, this was a simple, two-step procedure, with the national regulator approving a clearing house and notifying Esma, after which the authority would have six months to approve or reject the application.

In the closing stages of the rule-writing process, a number of member states have sought to take the final decision out of Esma’s hands. That produced a tortuous compromise in which a two-thirds majority of supervisors is required for an authorisation decision to be referred to Esma, and in which the CCP’s national regulator also has a right of appeal to Esma in certain circumstances – but reports yesterday suggested this compromise has also hit an obstacle.

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