European Union nations remain divided on which entities should be covered by a beefed-up regional markets regulator and how the watchdog should be governed and paid for, as talks on landmark reforms enter a critical phase.
People familiar with discussions said member states had yet to bridge key divisions on the so-called Markets Integration and Supervision Package, or MISP, ahead of a crunch meeting of EU finance ministers in Luxembourg on Friday.
The Irish presidency is hoping to broker political agreement on the deal among member states almost a year after the EU pitched its grand plan to centralize supervision and enforcement under the Paris-based European Securities and Markets Authority.
While the debate was progressing, significant disagreements remained, the people said, speaking on conditions of anonymity because talks on the matter are confidential.
One contentious issue is deciding which “significant” institutions fall under direct supervision of Paris-based European Securities and Markets Authority, including a compromise drafted by the Irish presidency that could see a handful of large entities including Germany’s Deutsche Boerse exempted.
Countries are also haggling over how much power to give a new executive board that will oversee ESMA’s operations, and how a more powerful ESMA should be funded.
The compromise agreement also restricts the new central supervision regime to “significant” crypto firms, rather than the commission’s politically contentious proposal to include all of them. Some clearinghouses and central securities depositories also escape central supervision.
In briefing notes for Friday’s meeting, Ireland said the compromise text “maintains the bulk of the Commission’s proposal and delivers on the core objectives while reflecting significant negotiations and trade-offs.”
“The text should be viewed as a package, and securing political agreement on the package is a significant step for EU financial markets,” the note adds.
A spokesman for the European Commission in Brussels declined to comment.
Asked about MISP on Thursday in Luxembourg, German Finance Minister Lars Klingbeil renewed his calls for movement on the matter.
“It is one of the important concerns, it is a game changer, it secures jobs and creates economic strength on our continent if we make progress on the capital markets union,” he said. “I hope and want to do everything possible to ensure that we reach an agreement among the European finance ministers tomorrow.”
His Spanish counterpart, Carlos Cuerpo, struck a similarly determined tone.
“We have been negotiating for 10 months, and it seems that we are finally beginning to see the finish line,” he told reporters. “We are at the final stage.”
The deal has been subject to extensive wrangling as some countries resisted giving up supervision of industries they have long overseen, even as the commission argued that a more harmonized market was needed so activity could realize its full potential.
The ultimate prize is European growth, alongside better returns for households that will be able to easily access these newly-buoyant markets.
Any package agreed by EU countries in Luxembourg on Friday must still go through the bloc’s legislative process. The European Parliament, which is agreeing its own position on the text, will then enter negotiations with the Council, which represents member nations, over the proposal. The EU’s “One Europe, One Market Roadmap” targets year-end for final agreement.
Euronext, which operates exchanges across seven EU countries and has backed the reforms, on Monday called on policymakers to “preserve the ambition of MISP and establish a genuine single-supervision framework under ESMA, supported by effective governance, clear accountability and a streamlined allocation of responsibilities.”
The commission protested the many deviations to the text in closed-door meetings with member states, arguing that some of the exceptions lacked sufficient justification and risked significantly undermining the package’s ambition and key objectives.
Commissioner Maria Luis Albuquerque, who has championed the plan, last month told Bloomberg that its ambition was “likely” to be diluted .
At an event in Brussels on Wednesday she said the constraints were “fully political.”
“It’s taken 15 years, so I don’t think the issue is time,” she said. “Either we are willing to do it or we are not.”