The Brexit Reform of European Financial Supervision: Lost in Transition?

Abstract

This article reviews the impact of Brexit on the European System of Financial Supervision (ESFS) and claims that the withdrawal of the United Kingdom will lead to more centralisation of supervision at EU level and a tightening of the supervision over third countries’ markets actors. This conclusion is based on a study of both the European authorities’ activism and the amendments recently adopted by EU legislators to reform the functioning of European financial supervision. Brexit has highlighted the extent of the remaining gaps in European financial supervision, which are partly due to the role that the UK played in designing European financial supervision. The reform is also geared towards mitigating the “costs” for the European economy incurred by Brexit. By analysing these developments, this contribution argues that Brexit has been seized by the European Union as an opportunity to significantly strengthen European financial supervision.