ROLE AND FUNCTIONS OF ESMA IN THE REALM OF EUROPEAN FINANCIAL SUPERVISION: How ESMA exercises Direct Supervision over Credit Rating Agencies

ESMA is the European’s financial markets regulator and supervisor. It is embedded in a sophisticated system called ESFS which also incorporates other EU agencies and institutions dedicated to specific areas of activity inherent to macro-prudential and micro-prudential supervision over the European financial markets. ESMA’s work and activities have been developed over time with an incremental power of action in the hands of the Authority due to its increasing relevance across the EU regulatory and supervisory regime. The conferral of direct supervisory powers to ESMA, referred to CRAs and trade repositories in the Union, constitutes an exception to the custos custodum model, in the realm of ESAs. In this regard, the model of direct supervision overpasses the traditional model of custos custodum, providing an appropriate system for supervision of CRAs in the Union. ESMA was able to shape its role, particularly referring to direct supervision, in an evolutionary process that had to deal with the stringent institutional and constitutional constraints.