Bloomberg Audio Studios, podcasts, radio news. Varnera's Chair of the European Securities and Markets Authority, thank you very much for speaking to us. First of all, I want to talk about some of the big issues that are happening at the moment in financial markets. We had these comments yesterday from Vadstan Brovskis talking about the EU being in toxanthropic to get access to mythos. This is something it's been a big concern for big banks and lenders in the US.
Can you bring us up to data where ESMA is in this process and what concerns you might have about this technology given all of the talk around us.
From an ESMA perspective, we are very much monitoring and looking at the developments. AI is speeding up some of the cyber environment significantly, and that means that we need to be conscious that financial entities are also stepping up their cyber protections in this environment, and so ASTHMA, as a financial regulator under the Digital Operational Resilience Act, clearly working with the national authorities and with our sister authorities on banking and insurance to make sure that we watch
very carefully how these new AI developments are changing the cyber landscape what financial entities need to do to in a much speedier way be able to patch and protect themselves, and so that is one key focus point for us
to share that experience to work together. At the same time, we are also together with our EU sister authorities, the oversight body for certain critical third party providers that are providing critical third party services to EU entities, and so we are also through that lens talking directly to them and trying to understand how they themselves are helping financial entities in the EU.
And do you get the impression that these companies that are operating in the financial services space are prepared for the potential risks from this technology.
Financial services entities have always, over the last few years been a key target for some of the cyber attacks and scams and so on. So this is something which I think a lot of entities have focused on. But what the recent AI developments are clearly bringing is a speed of new possibilities that is accelerating massively and that is presenting a risk which I think many of them still have to adapt to.
I want to turn some of the upcoming regulatory changes that are being discussed as well as part of the reason that has you in Brussels. The Market Integration and Supervision Package part of the drive towards Capital Markets Union now known as Savings and Investments Union. There's a debate over a lot of these changes that's happening among European
countries as well. What is your sense of where that debate is and how advanced the conversations are being had and moving to wards these big changes for your organization and other regulators as well.
The Commission put forward a very complete and ambitious proposal at the end of last year, and now it is down to the co legislators in the Parliament and in the Council to actually look at those proposals and decide what they believe should go into an ultimate package on market integration and supervision. That is the debate that is
currently going on. My impression is that there is a strong support for making a real step change in this area to creating more integrated capital markets that are basically less fragmented, reducing some of the complexity and potential for divergent outcomes, interlinking market infrastructure, and in creating a more innovative environment where also market infrastructure and new types of technology can be used and can actually I hope Europe
to create more efficient, more interlinked liquidity pools and more effective supervisory regime.
Do you feel there's more impetus now towards that change, because this is in a very long process and we've heard for a long time from the Draggy Report and others that Capital Markets Union is needed to improve Europe's economic outcomes. Do you think that things are moving faster now than they have been before.
I think if I look over the last year, I can certainly see an acceleration and a step up in admission. In particular, if you look at the demands for making sure that the capital markets can support some of the funding needs that Europe has given more fiscal constraints, giving the wish to also have more diversified funding sources beyond
the traditional lending from the banking sector. Member states and members of the European Parliament are clearly looking at how can we make a real step change here, and that is partly through policy changes at the EU level, but also partly by member states looking at their own pension systems. Incentives for investors to engage in capital markets, financial literacy
and areas such as that. So there's a really complex package of measures that needs to be considered to make a step change, and clearly market integration and supervision package is one part of that broader picture.
Do you think part of the change or the acceleration of that effort is coming from the impetus from the White House and the degrading relationship with the United States.
The key driver is that we need stronger European capital markets and that is really something where we still have too many barriers within the Single Market that currently are holding back European companies from being able to raise and
scale themselves with European investors' money. There are issues about investors being able to really benefit from the capital markets in the EU, and so there's a whole set of different incentives and drivers that are really pushing us ahead to try to say we need to make a difference here.
Europe remains part of a global financial system, that is clear, but at the same time, we need to have a capital market system in the EU that is able to provide the funding opportunities for companies and the investment opportunities for citizens.