Supervisory Convergence
Supervisory convergence aims for NCAs across the EU (and the EEA) to apply supervision in a consistent and equally effective manner.
Promoting effective supervision of the European Union (EU) capital markets is one of the strategic ambitions of ESMA. ESMA is the EU direct supervisor in several areas of capital markets. For the areas supervised by National Competent Authorities (NCAs), ESMA carries out supervisory convergence activities. These activities help reduce the risk of divergent practices that could lead to unfair competition, national biases or regulatory arbitrage.
To advance supervisory convergence, ESMA uses a wide range of tools. It develops high quality supervisory methods, coordinates the work of NCAs on specific topics and risks, and reviews certain supervisory practices and activities of NCAs. ESMA also creates opportunities for NCAs to exchange intelligence and information on their working methods.
Through supervisory convergence ESMA aims to:
Achieve robust supervisory outcomes
Ensure that investors, market participants, and citizens benefit from similar opportunities and are treated fairly across the EU
Respond rapidly and flexibly to developments affecting the financial sector
Protect the functioning and integrity of financial markets
Supervisory convergence is a continuous effort that depends on both ESMA and NCAs committing adequate resources, acting consistently and engaging proactively.
Establishing a common supervisory culture
A common supervisory culture is essential for a coherent approach to supervision across the EU. It means aligning how supervisors analyse, exercise judgement and take supervisory action.
ESMA promotes a consistent European supervisory framework, based on common principles that focus on risks, outcomes and the effective use of data. This framework is applied by both ESMA and the NCAs throughout the entire supervisory cycle.
To support the development of a common supervisory culture, ESMA uses a set of convergence tools and runs activities. These include peer exchanges, high-level principles, sectoral and thematic supervisory briefings, common guidance and training. Made available to NCAs, these tools and activities help foster shared understanding of regulatory requirements and supervisory objectives, as well as best practices, methodologies and processes. This contributes to achieving high-quality supervisory outcomes across the EU.
Promoting effective risk based prioritisation and outcome focused supervision
Risk‑based supervision aims to ensure that supervisory resources are targeted where they have the greatest impact on investor protection, market integrity and financial stability. Closely linked to this approach, outcome‑focused supervision encourages supervisors across the EU to design and calibrate their interventions based on shared supervisory objectives.
ESMA brings NCAs together to identify, assess and prioritise key risks affecting EU capital markets. In doing so, ESMA promotes the use of expert judgment and data-driven analysis, taking into account market developments, emerging trends and potential vulnerabilities. To support this, ESMA uses EU-wide risk analyses, and stress-testing.
In addition, ESMA helps NCAs use similar methods and tools to analyse risks and decide where to focus supervisory efforts. This supports consistent and proportionate responses across the EU and ensures that supervisory action reflects the nature and scale of risks in capital markets.
ESMA also establishes Union Strategic Supervisory Priorities (USSPs), identifying a limited number of high‑priority areas where ESMA and NCAs are jointly focused to deliver shared supervisory outcomes.
Fostering consistent and effective supervision on the ground
Supervisory convergence covers both a consistent understanding of the EU rulebook and its effective application in practice. It translates common regulatory objectives into concrete supervisory activities at national level, helping NCAs address day to day supervisory challenges.
ESMA uses a range of tools including, peer reviews, coordinated actions, college discussions, follow‑up activities to bolster proactive convergence and promote improvements. ESMA also promotes cooperation on data collection and data sharing among the NCAs and facilitates information sharing at EU level, including on cross-border activities.
