The Commission de surveillance du secteur financier (CSSF) was concerned by a review conducted by the European Securities and Markets Authority (ESMA) on the supervision of cross-border activities of investment firms and credit institutions. The conclusions of the assessment conducted in 2021 can be found in a report recently published by ESMA.
The assessment covered the supervision of six national financial regulators, including the CSSF. The Luxembourg financial regulator has indicated how it supervises investment firms and credit institutions that provide services to retail clients on a cross-border basis using a MiFID II passport, the European regulatory framework that aims to enhance investor protection.
Effective supervision of cross-border activities by national competent authorities is essential to ensure that retail customers enjoy the same level of protection, regardless of where a firm is established.
ESMA Chair Verena Ross reiterates the importance of standardising financial supervision at the European level: "Effective supervision of cross-border activities by national competent authorities is essential to ensure that retail customers enjoy the same level of protection, regardless of where a firm is established. She added: "As we strive to develop an efficient European capital market and retail investors increasingly access investment opportunities across the EU, ensuring investor protection and the smooth functioning of the single market is a key task for ESMA and national competent authorities."
Questionnaires and on-site visits
The conclusions report published by ESMA underlines the importance of this exercise: "Effective supervision of investment services provided on a cross-border basis is of paramount importance to ensure that investors in any EU jurisdiction receive the appropriate level of protection, regardless of the home jurisdiction of the entities providing these services."
Through questionnaires, on-site visits and contacts with stakeholders, the European Securities Regulator was able to give a grade to each of the national regulators audited.
Contacted on Monday morning, the CSSF did not comment on the publication of this report.
A second assessment in two years
Overall, ESMA found that the supervision exercised by national financial regulators "is not sufficiently effective with regard to the cross-border activities of their firms".
In particular, the European regulator concluded that the national regulators assessed "did not specifically, adequately and structurally address the cross-border activities of the firms under their supervision". ESMA notes that national authorities "have not sufficiently identified, assessed and monitored risks".
ESMA states that the review has revealed satisfactory results regarding the activities of investment firms and credit institutions in their host countries by regulators.
But the story is not over yet. ESMA plans to carry out a follow-up assessment within two years to see how well its recommendations have been implemented.
This story was first published in French on . It has been translated and edited for Delano.