The European Securities and Markets Authority (ESMA) has published a follow-up report on 20 July 2026 assessing how national competent authorities have addressed shortcomings identified in a 2023 peer review on the supervision of cross-border activities of investment firms. The report finds that while some authorities have taken steps to improve, overall progress remains partial and uneven across the EU, with several recommendations still not fully implemented.
The peer review, originally conducted in 2023, examined how national supervisors oversee investment firms that operate across borders, focusing on areas such as registration, ongoing supervision, and cooperation between authorities. The follow-up report evaluates the corrective actions taken by the authorities that were subject to the review. ESMA notes that a number of competent authorities have enhanced their supervisory practices, for instance by improving internal procedures for handling cross-border notifications or strengthening coordination with home and host state supervisors. However, the report also highlights persistent gaps, including insufficient resources dedicated to cross-border supervision, inconsistent application of MiFID II requirements, and limited use of supervisory tools such as on-site inspections for firms operating in multiple jurisdictions.
The findings carry implications for several stakeholders. For investment firms operating cross-border, the uneven supervision may create regulatory arbitrage opportunities, where firms choose to establish in jurisdictions with lighter oversight, potentially undermining investor protection and market integrity. National competent authorities face pressure to allocate more resources and harmonise practices, which could increase administrative burdens. EU consumers and investors may benefit from more consistent supervision that reduces risks of misconduct, but the slow progress means these benefits are not yet fully realised. ESMA itself is positioned to play a stronger coordinating role, potentially pushing for greater convergence through guidelines or binding technical standards if voluntary improvements remain insufficient.
The report does not propose new regulatory measures but serves as a monitoring tool to encourage national authorities to implement the peer review recommendations. ESMA may follow up with further assessments or escalate issues to the Board of Supervisors if progress continues to lag. The document underscores the ongoing challenge of achieving supervisory convergence in the EU's fragmented financial market, where national authorities retain primary responsibility for oversight but cross-border activities require close cooperation.