European capital markets must become more efficient, effective and competitive to channel household savings into productive investments, said Verena Ross, chairwoman of the European Securities and Markets Authority, on Wednesday 26 March 2025. Speaking to Paperjam on the sidelines of the Alfi Global Asset Management Conference at the European Convention Centre in Luxembourg, Ross outlined Esma’s priorities, stating, “We need to work to make [capital markets] more efficient, more effective, more competitive and also more attractive to overseas investors.” She stressed the importance of maintaining well-regulated and stable markets while facilitating retail investor participation in the financial system.

Regulatory and supervisory priorities for 2025

Ross outlined Esma’s key focus areas for 2025, including the implementation of significant regulatory measures. She noted, “There are still a lot of areas where we are implementing regulatory measures that were decided by the last European Parliament and Commission.” Among these measures were the introduction of consolidated tapes in European markets, the implementation of the Markets in Crypto-assets (Mica) framework and the Digital Operational Resilience Act (Dora).

She stressed the need for a uniform approach across the EU, ensuring regulatory clarity and consistency. “We need to make sure that implementation works well, is done in a consistent way, and that we provide the clarity and support that people need for implementation,” she explained.

At the same time, Ross highlighted the necessity of forward-looking risk monitoring, stating, “We need to be agile and able to act where we see risks emerging.” She added that Esma was working closely with the European Commission, member states and the European Parliament to advance the savings and investment union.

Market volatility and economic uncertainty

Ross pointed to heightened market volatility and uncertainty as a significant concern, referencing Esma’s Trends, Risks and Vulnerabilities Report, published in February 2025. She stated, “We are very concerned about the combination of quite high valuations in many of these markets and maybe an underappreciation of some of the risks that are there.”

She noted that market reactions could be sudden, leading to financial instability. “We are currently in an environment where there is a lot of uncertainty in the markets… Markets can react very quickly, and that can lead to some quite sudden market moves,” she warned. Esma was actively monitoring these developments in collaboration with national competent authorities to assess whether regulatory intervention was necessary.

Real estate investment risks

Discussing the real estate sector in the EU, Ross acknowledged Esma’s role in monitoring parts of the real estate markets. She stated, “We have monitored certain parts of the real estate market, both when it comes to the actual direct investment in real estate companies or projects, which have clearly declined quite a lot over the last few years.”

She also pointed out concerns related to valuation and potentially liquidity issues in real estate investment funds but clarified that broader housing policies were beyond Esma’s regulatory scope. “These are the aspects that Esma has focused on, because anything beyond that is really outside of our responsibilities,” she said.

Cybersecurity and financial market resilience

Ross highlighted the increasing threat of cyberattacks on the financial sector, describing cybersecurity as “a big focus point of ours at the moment.” She noted that Esma, in collaboration with the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (Eiopa), was prioritising the implementation of Dora to enhance operational resilience.

She explained, “We are focusing on building resilience of the European financial sector to operational risks, in particular when it comes to cyberattacks, but also the general dependence on critical IT providers and the concentration of some of those IT providers that are servicing the EU financial sector.”

Mica and Dora, which came into force between December 2024 and January 2025, were still in their early stages of implementation. Ross noted, “For both of them, we are now in the learning and implementation process with the national competent authorities, making sure that actually implementation is happening consistently on the ground.”

She emphasised the importance of regulatory convergence, warning against potential regulatory arbitrage as new crypto-asset service providers entered the EU market. “We are very keen to avoid regulatory arbitrage, to make sure that everyone is taking the same approach to the authorisation process and criteria,” she said.

On the topic of the digital euro, Ross confirmed that Esma is closely engaged with the European Central Bank (ECB). “Our focus is very much on understanding how some of these technological innovations are impacting the financial markets,” she said. She mentioned Esma’s interest in areas such as asset tokenisation, distributed ledger technology (DLT) and artificial intelligence (AI) in financial services, adding, “We are also considering the potential implications for the wider market and infrastructure once we move towards a more technologically advanced mechanism to trade, pay and settle.”

Regulatory harmonisation and supervision challenges

Ross acknowledged the ongoing challenge of harmonising financial regulation across the EU. She pointed out that Esma’s 2024 position paper, approved by its board of national regulators, called for considering more centralised supervision in specific areas. “Let’s look at in what sectors such European-level supervision might actually make sense and might be more efficient than the system that we have at the moment,” she said.

However, she recognised that national regulators were unlikely to relinquish significant supervisory responsibilities. “The vast majority of day-to-day supervision will very much rest with national competent authorities in most areas,” she admitted. She stressed in that context the importance of improving supervisory convergence to ensure consistency across borders.

When asked about reluctance from financial hubs such as Luxembourg to transfer regulatory powers to Esma, Ross avoided commenting directly but noted, “Europe has always been an amalgamation of different countries, different cultures, and we are stronger together when we use those specialisations, those capabilities that you have in different parts of Europe. And I think it will always be a market which is characterised by different financial centres, by different specialisations, but what we need to make sure is that it functions as one single market.”

Barriers to market consolidation

Ross acknowledged inefficiencies in the EU’s financial market infrastructure, particularly when compared to the US, which has fewer clearing houses and central depositories. She stated, “One of the areas we need to look at is what are the barriers that currently exist in the European Union to drive more interoperability and more consolidation.”

She explained that these barriers included legislative, taxation-related and government policy factors. “We need to see which ones are actually hindering the single market from working properly and where we need to remove the barriers to potential consolidation,” she said, adding that Esma’s role was to facilitate market-driven consolidation rather than enforce structural changes.

Urgency for capital market reform

At Esma’s 2025 conference in Paris, Ross stressed the need for immediate action to strengthen European capital markets. “The urgency and the consciousness on how urgent this is has increased a lot over the last year,” she observed.

She attributed this shift in sentiment to and Enrico Letta, as well as increasing funding challenges for sustainability, technology and defence. “Given the limits to public funding… it is necessary that the private financial markets and capital markets are able to function and fulfil that role,” she stated.

Key risks facing european financial markets

Ross identified several key risks threatening European financial stability, including high asset valuations, geopolitical uncertainty and macroeconomic instability. “There are a number of risks just in how markets will react to events, and how they might adjust in a rather sudden way,” she said.

She reiterated the importance of financial firms preparing for potential disruptions and maintaining operational resilience. “Financial services firms need to focus on protecting themselves as far as they can from cyber and other non-financial risks,” she concluded.