ESMA and EU Financial Market Governance Fifteen Years On: Soft Law, Functionality, and Expediency

Abstract

This article examines the wide extent and diverse nature of ESMA soft law, including as regards its quasi-binding effects and its legitimation arrangements, some fifteen years after the 2011 establishment of ESMA. It finds that ESMA’s development and adoption of a range of different forms of soft law has given it an agile capacity to shape EU financial market governance. This capacity can be expected to strengthen given the ratchet effect of the ESMA incentives and other dynamics shaping the extent and nature of ESMA soft law. ESMA’s effective use of soft law is essential to the management of financial market risk, and so to the success of the Savings and Investments Union (SIU) project. There are, however, legitimation risks which suggest that a strengthening of ESMA’s legitimation arrangements could usefully form part of the SIU reform agenda.