The European Parliament wants to give the European Securities and Markets Authority the power to conduct unannounced, on-site inspections of firms.
Esma is one of three European Supervisory Authorities which, along with the European Banking Authority and the European Insurance and Occupational Pensions Authority, began operating at the beginning of this year.
The proposed measure is contained in the parliament’s amended text of the short Selling and credit derivative swap regulation.
It says: “Esma may conduct all necessary on-site inspections with or without prior announcement.”
Conservative MEP for London Syed Kamall says there is not enough clarity over whether the power will apply only in relation to short selling or when Esma deals with wider market concerns. Kamall says if it becomes law it could set a precedent and see other European financial regulators get similar powers. He says: “I am very worried about the way European regulation is going in financial services. The European Parliament wants to give Esma the right to conduct on-site inspections of City firms without prior arrangement. This is a step too far. I think that as legislators we really do need to try to understand the difference between regulation and supervision.”
Kamall says he has approached legal authorities within the European Union to see if the move contravenes the legislation under which the ESAs operate.
He says: “The thing I have noticed about the crisis and how we react as politicians at an EU level is that it is used as an excuse for more EU legislation and regulation. Do we really need a European supervisory architecture with separate authorities for banking, markets and insurance and pensions rather than just coordinating and sharing data?”
“What will happen in reality is that the FSA and its successor organisations will end up doing little more than implementing and supervising EU regulation.”
The commission’s original proposals for Esma do not include the measure and discussions are now under way to reach an agreement.
French Green MEP Pascal Canfin proposed the amendment. He declined to comment because of live negotiations over the final text.