Becoming a Powerful Regulator: Explaining the Prominence of the European Securities and Markets Authority (ESMA) in European Financial Sector Governance

Originating from a networked committee of national supervisory authorities with limited decision-making powers, the European Securities and Markets Authority (ESMA) has become a prominent regulator in European financial sector governance since 2008. It is the single supervisor of credit rating agencies and trade repositories operating in the EU and has recently exercised its new powers to impose fines on firms violating the EU rules. ESMA has both decision-making and information gathering powers. It decides upon important binding technical standards in securities trading and plays a crucial role in the harmonisation of national practices across the EU through issuing guidelines, disseminating best practices and conducting peer reviews. What explains this unparalleled transfer of powers to the supranational level in European financial sector governance? This paper argues that the succession of crises affecting the EU’s financial and economic order since 2008 created a momentum for centralisation of governance, operationalised in terms of the creation of new EU bodies and transfer of powers and competences from the member states to the EU level. Furthermore, as a consequence of a series of EU legislative reforms since 2011, ESMA has received new responsibilities and powers to ensure harmonised rule application across the EU.