Q: Who actually benefits from centralised supervision — investors, regulators or political institutions?
A: A supervisory approach where the European Securities and Markets Authority (Esma) becomes a pan-EU supervisor akin to the ECB post-2014 adds distance from local markets where investor protection really happens. National competent authorities in key European financial hubs, such as Luxembourg and Ireland, have already developed the expertise necessary over the decades to oversee the complex asset management industry, particularly when it comes to supervising cross-border funds and managers. Stripping that context out risks paving the way for a one‑size‑fits‑none supervision.
As such, if we can speak of who benefits or suffers, those least likely to benefit will be investors – both institutional and retail – as well as asset managers who will now face duplicated processes and slower decisions. Europe’s framework already delivers broad cross‑border access under UCITS and AIFMD. The marginal benefit of centralising supervision is low compared to the operational complexity it introduces, and it does not tackle the real frictions, such as divergent marketing rules, tax mismatches, and national gold‑plating.
Q: Is there any evidence that Esma-led supervision would have prevented recent fund failures or market stress events?
A: Whereas one may rightly argue that centralised supervision of the banking sector under the ECB is necessary and has delivered its fruits, asset management is very different from banking. Managers generally act as agents acting on behalf of the principals (investors), and the supervisory toolkit overseeing the industry deals with conduct, liquidity management, and disclosure.
Centralising oversight does not fix the root causes of episodes like liquidity mismatches or governance lapses. These require regulatory convergence and a strong, uniform application of the rules. Esma’s existing instruments, such as peer reviews, Common Supervisory Actions, and Q&As, are already effective and are helping drive consistency where needed. Using these tools rigorously is more likely to raise standards than reorganising supervisory responsibilities. In short, better supervision comes from better convergence and data, not a different postal address for the supervisor.
Q: You argue passporting works, so why is it being questioned now? What problem is Brussels actually trying to solve?
Passporting is one of the Single Market’s (the European Union’s system that allows goods, services, capital and people to move freely across member states) major success stories: it lets manufacturers of financial products distribute their products across the EU without local reauthorisations, and this has paved the way for crossborder funds to outgrow purely domestic ones. The political drive for centralised supervision is framed as completing the Savings and Investments Union, and it is possible that European policymakers are hoping for a ‘political win’ after lacklustre progress on the former Capital Markets Union, which was launched all the way back in 2015. Moreover, the undeniable success of the ECB’s centralised supervision, which was enacted around the time the CMU was launched, may also be influencing policymakers’ thinking.
However, this misdiagnoses the bottlenecks. The true frictions are outside of supervision and in inconsistent marketing regimes, tax fragmentation, differing reporting formats, and national goldplating. Changing who validates the compliance documents does not harmonise these realities. A smarter route is supervisory convergence (e.g., common data standards, peer reviews against outliers, unified reporting framework) while preserving clear national accountability.
Q: Could centralised supervision end up weakening accountability by blurring responsibility between national regulators and Esma?
I think that this is a potential risk, as centralised supervision might paradoxically lead to a diffusion of responsibility, as overlapping mandates create duplication, slower decisions and more scope for politicisation of authorisations or enforcement. Clarity of who supervises what (and who answers to investors and parliaments) matters more than where the supervisor sits.
The current framework keeps a clear line of sight: responsibility lies with the national competent authorities which are supported by Esma’s tools to ensure convergence. If this system is replaced with direct Esma oversight, a situation of contested remits and “everyone responsible, no one accountable” might arise. That would be the opposite of investor protection.
While the SIU package of reforms issued in December seems to put one-size-fits-all centralised supervision on the back burner, it does nonetheless introduce annual reviews of large cross-border asset managers by Esma. This could be problematic as it could potentially pave the way for supervisory friction between Esma and the NCAs. Indeed, the latter’s decisions might be second-guessed or challenged by Esma, leading to potentially unnecessary complications when we bear in mind that the industry is already well-regulated and there hasn’t been any significant supervisory failure.
“Europe cannot afford symbolic institutional reorganisations that add drag. The focus should be on streamlining approvals and reporting, not multiplying interlocutors.”
Q: Europe talks a lot about competitiveness, but isn’t this exactly the kind of regulatory layering that risks pushing fund launches and talent elsewhere?
A: This is another potential risk that centralised supervision might inadvertently bring. After all, additional supervisory and regulatory layers raise time to market, legal uncertainty and operating cost. These are precisely the levers global asset managers weigh when choosing where to launch their funds and base their teams.
Europe cannot afford symbolic institutional reorganisations that add drag. The focus should be on streamlining approvals and reporting, not multiplying interlocutors. A potential alternative approach would be to provide the ESAs with an additional mandate to promote the competitiveness of the EU economy, although it should always remain secondary to investor protections and financial stability. Industry associations have long called for this, and Esma’s Own initiative report on simplification from September 2025 even stated that “the mandate given to Esma should include EU competitiveness as a secondary objective, provided that this does not compromise investor protection.”
Q: If you were advising policymakers privately, what would you tell them not to do when reforming supervision?
A: Over the last year, both the Association of the Luxembourg Funds Industry and the European Fund and Asset Management Association, the trade body, have consistently cautioned against pursuing centralised supervision for asset managers at the EU level. They rightly argue that the current UCITS and AIFMD frameworks are functioning well and that further revisions risk creating unnecessary complexity and overlapping regulatory obligations.
Instead of introducing new supervisory layers or shifting responsibilities to Esma, policymakers should avoid disrupting a model that has delivered a successful Single Market for investment funds. The main cross-border barriers stem from national legal frameworks and cannot be resolved by centralisation. This is where the focus should be, and this is why greater convergence of regulations and supervisory practices, streamlined reporting, and enhanced cooperation among national authorities are necessary – rather than centralised supervision.
Q: From what you see advising asset managers across Europe, what practical impacts of centralised supervision are firms most worried about and which risks do you think are still being underplayed?
A: Generally speaking, asset managers are either ambiguous about centralised supervision or outright worried that it will bring forth duplicated reporting, longer and less predictable approvals, as well as conflicting supervisory instructions. For asset managers who are already under extensive pressure to maintain profitability (see PwC’s latest AWM Revolution report), these worries are by no means trivial.
In addition to increased costs, other potential risks include dampened product innovation, especially in alternatives, at a time when Europe’s competitiveness is sorely lacking and we need to urgently encourage capital flows towards the key sectors and industries of the future. When geopolitical and trade tensions are putting extreme, multifaceted pressure on Europe, the last thing we need is for capital flows to be hindered.
