Cross-border investment supervision across the EU has strengthened, but regulators in outbound-heavy markets are being urged to keep pace, according to the European Securities and Markets Authority (ESMA), the EU’s financial markets regulator and supervisor.
ESMA has released a follow-up report to its Peer Review examining how investment firms’ cross-border activities are supervised. The assessment measures how far national competent authorities (NCAs) have gone in acting on recommendations first set out in 2022, with the review spanning six jurisdictions: the Netherlands, Germany, the Czech Republic, Luxembourg, Cyprus and Malta.
According to the findings, the original peer review has been a catalyst for improvement throughout the supervisory cycle, reinforcing oversight of investment services provided across borders within the EU Single Market.
Three areas stood out for progress. Authorisation controls have become more robust, with NCAs applying deeper scrutiny to firms’ plans for operating across borders. Supervision has also become more data-led and risk-focused, with authorities drawing on data to track cross-border activity and calibrating their interventions to the risks they identify. Finally, cooperation and enforcement have improved, with NCAs carrying out more targeted supervisory actions, reporting enforcement cases where appropriate and working together more closely.
The regulator nonetheless cautioned that NCAs overseeing substantial outbound cross-border business should ensure their supervisory and enforcement frameworks reflect the scale and complexity of that activity, and adapt as risks evolve. It stressed that effective oversight of cross-border services is fundamental to giving investors consistent protection wherever those services originate.
ESMA is the EU’s financial markets regulator and supervisor, responsible for overseeing the bloc’s securities markets.
Looking ahead, ESMA has called on all NCAs, particularly those seeing significant growth in outgoing cross-border activity, to consider the report’s conclusions. With retail cross-border investment services continuing to expand, the authority said it will keep prioritising supervisory convergence, closer cooperation between national supervisors and data-driven, risk-based oversight, with the goal of bolstering investor protection and supporting the effective functioning of the EU Single Market.
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