Regulators from the European Union (EU) and the United States (US) have come together to discuss deeper oversight of their respective capital markets. The discussions were held as part of the US-EU Joint Regulatory Forum in February, and representatives from the European Commission, the European Banking Authority, and the European Securities and Markets Authority met with delegates from the US Department of the Treasury and the Securities and Exchange Commission.

In the EU, the regulatory framework for capital markets oversight is primarily governed by the European Securities and Markets Authority (ESMA), which supervises securities markets and ensures their orderly functioning. ESMA also monitors market abuse and works to promote investor protection. Meanwhile, in the US, the Securities and Exchange Commission (SEC) is the primary regulator of the securities markets. It regulates securities offerings, exchanges, and other actions related to the purchasing and selling of securities.

The EU and US regulators are looking to deepen the capital markets oversight to increase financial stability and ensure investor protection. Sustainability, dangers to financial stability, operational resilience, and the regulation of digital finance and capital markets are some of their top concerns. Additionally, there are ongoing discussions about the transition away from the London Interbank Offered Rate (LIBOR), which is set to be discontinued at the end of 2021. Given the widespread use of LIBOR as a benchmark for financial contracts, the transition away from it is a significant challenge that requires close coordination and supervision.

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The regulators from the EU and the US reaffirmed throughout the meetings that they support the standards established by the International Sustainability Standards Board, exhibiting a joint commitment to advancing sustainable finance. They also held talks on possible crypto-asset enforcement, highlighting the need to address the risks associated with cryptocurrencies.

The EU presented progress on implementing the Sustainable Finance Disclosure Regulation and developing European Sustainability Reporting Standards, as mandated under the Corporate Sustainability Reporting Directive. The SEC staff also discussed the SEC’s proposals to enhance disclosures regarding issuers’ climate-related risks and disclosures by certain funds and investment advisers regarding ESG practices, further underlining the importance of sustainability in the regulatory development landscape.

The discussions also touched on operational resilience, an increasingly important issue in the wake of the COVID-19 pandemic. The regulators discussed ways to ensure that capital markets remain resilient in the face of operational disruptions.

In addition to these issues, the European Commission provided updates on the review of the Markets in Financial Instruments Directive and Regulation and laws surrounding alternative investment funds and traditional Ucits funds. The SEC staff also updated their recent proposed rules and amendments related to investment funds and equity market structures.