Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Varnera's Chair of the
Speaker 1: European Securities and Markets Authority, thank you very much for
Speaker 1: speaking to us. First of all, I want to talk
Speaker 1: about some of the big issues that are happening at
Speaker 1: the moment in financial markets. We had these comments yesterday
Speaker 1: from Vadstan Brovskis talking about the EU being in toxanthropic
Speaker 1: to get access to mythos. This is something it's been
Speaker 1: a big concern for big banks and lenders in the US.
Speaker 1: Can you bring us up to data where ESMA is
Speaker 1: in this process and what concerns you might have about
Speaker 1: this technology given all of the talk around us.
Speaker 2: From an ESMA perspective, we are very much monitoring and
Speaker 2: looking at the developments. AI is speeding up some of
Speaker 2: the cyber environment significantly, and that means that we need
Speaker 2: to be conscious that financial entities are also stepping up
Speaker 2: their cyber protections in this environment, and so ASTHMA, as
Speaker 2: a financial regulator under the Digital Operational Resilience Act, clearly
Speaker 2: working with the national authorities and with our sister authorities
Speaker 2: on banking and insurance to make sure that we watch
Speaker 2: very carefully how these new AI developments are changing the
Speaker 2: cyber landscape what financial entities need to do to in
Speaker 2: a much speedier way be able to patch and protect themselves,
Speaker 2: and so that is one key focus point for us
Speaker 2: to share that experience to work together. At the same time,
Speaker 2: we are also together with our EU sister authorities, the
Speaker 2: oversight body for certain critical third party providers that are
Speaker 2: providing critical third party services to EU entities, and so
Speaker 2: we are also through that lens talking directly to them
Speaker 2: and trying to understand how they themselves are helping financial
Speaker 2: entities in the EU.
Speaker 1: And do you get the impression that these companies that
Speaker 1: are operating in the financial services space are prepared for
Speaker 1: the potential risks from this technology.
Speaker 2: Financial services entities have always, over the last few years
Speaker 2: been a key target for some of the cyber attacks
Speaker 2: and scams and so on. So this is something which
Speaker 2: I think a lot of entities have focused on. But
Speaker 2: what the recent AI developments are clearly bringing is a
Speaker 2: speed of new possibilities that is accelerating massively and that
Speaker 2: is presenting a risk which I think many of them
Speaker 2: still have to adapt to.
Speaker 1: I want to turn some of the upcoming regulatory changes
Speaker 1: that are being discussed as well as part of the
Speaker 1: reason that has you in Brussels. The Market Integration and
Speaker 1: Supervision Package part of the drive towards Capital Markets Union
Speaker 1: now known as Savings and Investments Union. There's a debate
Speaker 1: over a lot of these changes that's happening among European
Speaker 1: countries as well. What is your sense of where that
Speaker 1: debate is and how advanced the conversations are being had
Speaker 1: and moving to wards these big changes for your organization
Speaker 1: and other regulators as well.
Speaker 2: The Commission put forward a very complete and ambitious proposal
Speaker 2: at the end of last year, and now it is
Speaker 2: down to the co legislators in the Parliament and in
Speaker 2: the Council to actually look at those proposals and decide
Speaker 2: what they believe should go into an ultimate package on
Speaker 2: market integration and supervision. That is the debate that is
Speaker 2: currently going on. My impression is that there is a
Speaker 2: strong support for making a real step change in this
Speaker 2: area to creating more integrated capital markets that are basically
Speaker 2: less fragmented, reducing some of the complexity and potential for
Speaker 2: divergent outcomes, interlinking market infrastructure, and in creating a more
Speaker 2: innovative environment where also market infrastructure and new types of
Speaker 2: technology can be used and can actually I hope Europe
Speaker 2: to create more efficient, more interlinked liquidity pools and more
Speaker 2: effective supervisory regime.
Speaker 1: Do you feel there's more impetus now towards that change,
Speaker 1: because this is in a very long process and we've
Speaker 1: heard for a long time from the Draggy Report and
Speaker 1: others that Capital Markets Union is needed to improve Europe's
Speaker 1: economic outcomes. Do you think that things are moving faster
Speaker 1: now than they have been before.
Speaker 2: I think if I look over the last year, I
Speaker 2: can certainly see an acceleration and a step up in admission.
Speaker 2: In particular, if you look at the demands for making
Speaker 2: sure that the capital markets can support some of the
Speaker 2: funding needs that Europe has given more fiscal constraints, giving
Speaker 2: the wish to also have more diversified funding sources beyond
Speaker 2: the traditional lending from the banking sector. Member states and
Speaker 2: members of the European Parliament are clearly looking at how
Speaker 2: can we make a real step change here, and that
Speaker 2: is partly through policy changes at the EU level, but
Speaker 2: also partly by member states looking at their own pension systems.
Speaker 2: Incentives for investors to engage in capital markets, financial literacy
Speaker 2: and areas such as that. So there's a really complex
Speaker 2: package of measures that needs to be considered to make
Speaker 2: a step change, and clearly market integration and supervision package
Speaker 2: is one part of that broader picture.
Speaker 1: Do you think part of the change or the acceleration
Speaker 1: of that effort is coming from the impetus from the
Speaker 1: White House and the degrading relationship with the United States.
Speaker 2: The key driver is that we need stronger European capital
Speaker 2: markets and that is really something where we still have
Speaker 2: too many barriers within the Single Market that currently are
Speaker 2: holding back European companies from being able to raise and
Speaker 2: scale themselves with European investors' money. There are issues about
Speaker 2: investors being able to really benefit from the capital markets
Speaker 2: in the EU, and so there's a whole set of
Speaker 2: different incentives and drivers that are really pushing us ahead
Speaker 2: to try to say we need to make a difference here.
Speaker 2: Europe remains part of a global financial system, that is clear,
Speaker 2: but at the same time, we need to have a
Speaker 2: capital market system in the EU that is able to
Speaker 2: provide the funding opportunities for companies and the investment opportunities
Speaker 2: for citizens.