EU Finance Ministers Agree on Market Supervision Reforms to Boost European Investment

European Union finance ministers have reached an agreement on a major element of the proposed Savings and Investment Union (SIU), paving the way for stronger EU-level supervision of financial markets and easier cross-border investment.

The deal, reached at a meeting in Luxembourg on Friday chaired by Ireland’s Tánaiste Simon Harris, was described by Irish officials as the most significant achievement of Ireland’s presidency of the Council of the EU so far.

Harris welcomed the agreement as “a practical step towards a more integrated, competitive and resilient European economy”. Ministers accepted a compromise text on how financial services operating across national borders should be supervised.

The Market Integration and Supervision Package (MISP) will transfer some supervisory responsibilities from national regulators to the Paris-based European Securities and Markets Authority (ESMA). The watchdog will gain expanded powers over major trading venues, clearing houses, securities depositories and crypto-asset service providers.

A new full-time, independent executive board will also be established within ESMA, according to a statement from Harris.

The reforms form part of the broader SIU initiative, which aims to reduce barriers between national financial markets and direct more European savings towards businesses and investment. The European Commission estimates that around €10 trillion in household savings across the bloc sits in low-yield bank deposits rather than European capital markets.

Supporters argue that making these funds more accessible to businesses could improve financing for small and medium-sized enterprises, help promising companies expand and strengthen Europe’s competitiveness against rivals such as the United States.

“Open, well-functioning and integrated European capital markets are an essential pillar of the Single Market,” Harris said, adding that European savings should do more to finance innovation, businesses and jobs.

Dispute over national supervision

The negotiations had been complicated by disagreements over how much authority should be transferred to ESMA. While the European Commission argues that centralised supervision would reduce duplication and improve consistency, some member states maintain that national regulators possess valuable local expertise.

Germany’s Deutsche Börse has sought flexibility over whether some of its operations should remain under domestic supervision or fall within ESMA’s authority.

A position previously supported by Germany, France, Italy, Poland, Spain and the Netherlands backed stronger European supervision while allowing Deutsche Börse discretion over its participation.

However, Harris told reporters before Friday’s meeting that the agreement would not provide specific carve-outs. Instead, he said, it would establish clear criteria, timelines and transition periods.

Ireland had previously expressed concerns that expanding ESMA’s powers could affect the competitiveness of its International Financial Services Centre. During its EU presidency, however, Dublin has taken a neutral position and worked to secure agreement among member states.

The Commission has argued that fragmented financial markets prevent European companies from benefiting fully from economies of scale. In 2024, stock market capitalisation stood at 73% of EU gross domestic product, compared with 270% in the United States.

The agreement represents a step towards reducing those differences, although the reforms must progress through the EU legislative process before the new supervisory arrangements can take effect.