Examining agency governance in the European Union financial sector – a case-study of the European Securities and Markets Authority

Abstract

Ever since the outset of the financial crisis of 2009, agencies have emerged as key actors of European Union (EU) financial sector governance. As an organisational form that can be insulated from national political pressures, and committed to the Union interest, agencies proliferated in the financial sector ushering the agencification trend in finance. In this sense, the European Securities and Markets Authority (ESMA) -as part of the European Supervisory Authorities -practically embodies this trend. ESMA presents a radical shift in financial markets' governance due to the nature of its soft law regulations and the direct impact it exerts on addressees' behaviour in emergency circumstances. But ESMA's success in optimising financial sector governance largely depends on its legitimacy, which is centred on independence. At the same time independence demands wider participation and inclusiveness of the decision-making process. This is not easy to achieve in a complex system with multiple stakeholders as is the governance of the EU financial sector (e.g., EU institutions, national actors, private sector). This paper examines ESMA's interinstitutional relations and independence in light of publicly voiced criticism. We find that ESMA's main executive bodies are still susceptible to influences by Member States as well as EU institutions (i.e., Commission), which undermines its operational independence.

Eu Agencification and the Rise of Esma: Are Its Governance Arrangements Fit for Purpose?

“…The rationale of the financial sector ESAs complements the wider phenomenon in the EU order of agencificiation. 178 In this space, ESMA's emergence within the ESAs' as an astute and ambitious authority is indicative of the EU's strengthening technocratic capacity. At the same time, it also fleshes out the widening of the gap between the model of EU agencies as originally conceived and the reality of ESMA's position.…”