Verena Ross was recently appointed the new Chair of the European Securities and Markets Authority (ESMA). She answers some questions about the challenges she sees ahead, the importance of capital markets, and what steps she thinks need to be taken to get more women in leading roles in finance.  

You already know ESMA very well from your previous position as Executive Director. What new challenges do you anticipate in your role as Chair?

It really is a challenging environment generally. We have the pandemic, the general market uncertainty, and the demands of the transformations linked to digital and sustainability. Such an environment also creates high expectations of what ESMA needs to deliver. So, I would see that as one of the key challenges – looking across the whole range of ESMA’s remit and making sure that we focus on the right things and that we are clear in what we can deliver.

Compared to my previous position, the role of Chair is very different. It is far more externally focused; it is really about the strategic leadership and external visibility of the organisation. So for me the challenge is to make sure we interact properly and proactively with securities regulators in the EU, at national level, with co-legislators, the Commission and also the wider stakeholder community. It is also vital to look at the key challenges at the international level, because we operate in a global, and not just a European, context.

You will have seen that the Commission presented its Capital Markets Union package in November. What are your thoughts about the package and the role of ESMA?

I was very impressed with both the extensiveness and ambition of this package. I think it could be a real game-changer. More specifically, I would focus on the European Single Access Point, because this is so important for enhancing investor protection by improving the accessibility and usability of information, particularly in the context of sustainable investing. It also fits nicely with the Commission’s more strategic approach to streamlining and standardising supervisory reporting, and making sure that the market has the right information to make judgements and that investors know what they are actually investing in.    

Another potential game-changer is the MiFIR proposal on a ‘consolidated tape’ of securities transactions, which is really about enhancing transparency. It is not going to be easy – it is a very controversial topic, but to my mind this is another area where the capital markets of Europe need that central data source to be operating efficiently and effectively, and I think building this consolidated tape will really help towards that.

Looking at the investment fund areas, I think the proposals here are about creating an even better single market. It is about ensuring the cross-border flow and making sure these products can be offered effectively on a European-wide basis, whilst looking at the long-term effect of how the fund industry can support long-term investing. All of these initiatives are there to support the creation of a strong Capital Markets Union where European citizens and companies can find the investments and get the capital they are looking for.

The green transition is an important priority for the EU. What role can EU capital markets play to facilitate this transition and how can ESMA contribute?

I think we should not talk about the Capital Markets Union in the abstract. The important thing is why do we need it and what is it actually going to help us do. The main point is that financial markets can play a major role in ensuring capital flows to support the digital and the sustainable transformation. Financial markets are changing and we have already seen the limits of relying on banks for funding. Therefore, it is important that capital markets can step up and provide the diversified funding sources needed for these transformational programs and the recovery from the pandemic. There is actually quite a lot of capital saving in the EU. We need to make sure that we as investors can use these savings to help our own future planning for pensions, education etc.

On the sustainable finance strategy – a word about ESMA’s particular role. Firstly, we are working on the rules on environmental, social, and governance (ESG) disclosure. Another key element is the work on non-financial reporting. We will work with national authorities and international partners to prevent the risk of green-washing, which is really central to all our objectives and essential to ensure there is overall confidence in a more sustainable financial system. ESMA plays a key role in ensuring transparent and reliable information for the end investors, to help them make the right choices, being sufficiently educated on the fundamentals of sustainable investing.       

How do you see the development of EU capital markets in the coming years? What are the key opportunities and risks/challenges? And how can we ensure more participation by SMEs and retail investors?

I have already mentioned sustainability, but the digital developments that are going on are another big challenge. It is a perfect example of an issue that we always face as regulators and supervisors, trying to react to rapid innovation and market developments. Digitalisation is both a great challenge and a fantastic opportunity. Looking at crypto assets, for instance, these have developed enormously and are becoming part of the financial ‘furniture’, giving rise to some significant investor protection concerns.  More generally, we have observed over the last few years that more retail investors are choosing to participate in capital markets.  This is positive, but at the same time, as EU securities markets supervisors we need to make sure that these investors are properly protected.

Regarding SMEs – they are really the backbone of the European economy, but they find it sometimes difficult to get access to capital. If you compare the EU to the US for example, the diversification of funding sources is just not there yet in Europe. The challenge is achieving a balance – of the burden of requirements and reporting, and the need of investors to be properly protected. Ensuring Europe has a capital market that works for companies and investors is even more important in light of Brexit.    

Women are still vastly outnumbered by men in the financial services sector, at least at higher levels. What has your experience been, as a woman, of building a career? And what steps do you think should be taken to get more women in leading roles in finance, both in industry and as regulators or supervisors?

If I look back over a number of years, it used to be quite normal that I would be the only woman in a meeting. I think that has changed significantly. I see a difference between the public and the private sectors. My impression is that in the public sector – regulators and supervisors – you now get quite a few senior women at the top of the organisations, whereas the private sector seems to be still lagging behind. Finding the right support network is very important and there, as female managers, we can play a role. I also think we need to look beyond gender diversity – for me it is about ensuring diversity across all facets and backgrounds. All the research shows that the worst thing you can do is to have only like-minded people with the same background in your organisation. You really need, especially in financial services, that diversity of viewpoints and experience to find the right solutions.