In a September 26 speech at the European Parliament, Steven Maijoor, chairman of the European Securities and Markets Authority, said the fines currently within the regulator’s power to impose were “too low” to combat bad behaviour among the firms it supervises.
“Esma believes that the right way forward would be to calculate fines as a minimum percentage of the turnover of the [rating agency] or the [trade repository]. I would very much appreciate the Parliament’s support on this matter,” Maijoor said.
Esma’s fines are currently limited to certain amounts per infringement. Those amounts run up to €750,000 per infringement for rating agencies and for repositories up to €20,000 per infringement.
The remarks follow recent fines levied against a ratings agency and a trade repository.
On July 21, Esma said it had fined Fitch Ratings €1.38 million for “negligent breaches” of credit rating agency rules. Esma found that some of Fitch’s analysts transmitted information about upcoming actions on sovereign ratings to senior people in a parent company of Fitch before the information was made publicly available.
In late March, Esma fined the Depository Trust & Clearing Corporation €64,000 for infringements over a nine-month period, including failing to put in place systems that could give regulators direct and immediate access to derivatives trading data. The fine imposed on DTCC was Esma’s first enforcement action against a trade repository.
Noting the two fines, Maijoor said: “I see our ability to impose sanctions to be an important deterrent tool in combating misbehaviour by regulated firms.”
Esma became responsible for directly supervising trade repositories in 2013 under the European Market Infrastructure Regulation, which was introduced to address risks in the derivatives market and to improve transparency.
Reporting derivatives contracts to trade repositories is designed to make the market more transparent and better help regulators identify points of failure within the system.
Esma, and the other European Supervisory Agencies formed in 2011, are currently being reviewed by the European Commission, which could see them given even more powers around supervisory convergence and their funding model changed. A white paper from the Commission’s review of the ESAs is expected by the end of the year.