EU Markets Regulator Shifts Priority To COVID-19 Crisis

By Najiyya Budaly
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Law360, London (June 16, 2020, 4:42 PM BST) -- Europe's markets watchdog has said it will concentrate on protecting the financial sector from the coronavirus pandemic in 2020, putting other mandates such as promoting sustainable finance and monitoring financial technology on the back-burner.

The European Securities and Markets Authority said on Monday that its immediate priority over the next year will be to help financial institutions and regulators weather the risks and challenges posed by COVID-19. The authority said it has revised its 2020 work program to reflect the change in focus to a coordinated European response to the crisis.

ESMA said in October that it would concentrate on establishing enhanced enforcement powers in sectors including technology, sustainable finance and stress-testing, a role it was handed by the European Supervisory Authorities. But the watchdog said on Monday that it will use 2020 to concentrate on its response to COVID-19.

"In order to respond adequately to the repercussions of the COVID-19 situation on the financial markets, a full assessment of ESMA activities for 2020 was undertaken," the authority said in its updated program for 2020. "Each activity in the originally planned 2020 annual work program was evaluated and assessed against criteria of relevance for the market and urgency."

European lawmakers pushed through changes to regulations governing the bloc's three financial watchdogs, including ESMA, in 2019. The markets regulator has had direct oversight over financial instruments and benchmarks since January.

The watchdog also ensures that national regulators supervise financial technology, promoting sustainable finance and carry out stress tests consistently across Europe. But ESMA said its priority is to prevent risk to the financial sector as the European Union responds to the coronavirus crisis.

ESMA said it will also extend consultations on other areas to give financial institutions time to concentrate on the pandemic.

"ESMA has taken carefully calibrated regulatory actions during the COVID-19 crisis designed to ensure that markets remain stable and investors protected," ESMA's chairman, Steven Maijoor, said on Monday.

The markets regulator has already put in place tougher rules on short-selling during the crisis to help ensure financial stability. The temporary rules, which lower the threshold at which traders taking short positions must report those positions to regulators, will be in place until September.

Short selling — the tactic in which traders sell shares and plan to buy them back later at a lower price and pocket the difference — can drive share prices further down if the number of short sellers outweighs buyers, which is more likely during a global virus scare.

--Editing by Ed Harris.

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