The long-awaited EU competitiveness report by former ECB president Mario Draghi, released yesterday, sparked debate across Europe’s financial markets. Draghi emphasised that the EU needs more coordinated industrial policies, faster decision-making, and major investment to stay competitive with global rivals like the US and China.
According to Mike Delano, partner & AWM Leader at PwC Luxembourg, this proposal, if implemented, could significantly affect Luxembourg, a key asset management hub, given its prominent position in the fund delegation market.
Since its creation in January 2011 after the global financial crisis and Euro area debt crisis, Esma has effectively ensured market transparency, efficiency, and stability. Its emphasis on investor protection and promoting fair competition has fostered a stable environment for the growth of diverse investment products and services across European financial markets.
Luxembourg, a significant asset management hub, has particularly benefited from Esma’s harmonisation of regulations, said Delano. By operating within a consistent regulatory framework, Luxembourg has been able to align with the broader European financial landscape while maintaining its position as a competitive financial centre. Esma’s influence has reinforced market fairness and provided clarity in cross-border operations within Europe’s diverse financial markets.
However, proposals to centralise financial market supervision under a single EU body, as recently advocated by former ECB Governor Mario Draghi, “could prove to be misguided and may backfire”, said Delano. A single supervisor would not be able to address the national regulations, such as tax and insurance laws, that fragment the market. Instead of centralisation, enhancing collaboration between Esma and national regulators would be a more effective solution, allowing the flexibility needed to overcome regulatory complexities and maintain the competitive advantage of individual financial centres like Luxembourg.
“Strengthening the collaboration between national competent authorities and Esma could ensure that European financial centres, including Luxembourg, maintain their competitive edge while addressing the complexities of cross-border operations,” he said. This approach, according to Delano, would retain the benefits of local regulatory expertise while enhancing market integration.
