Collegial panopticon? Peer review in the European Securities and Markets Authority

We explore an understudied feature of the European Supervisory agencies: the use of peer review regulatory mechanism in transnational financial regulation as performed by the European Securities and Markets Authority (ESMA). The aim is to show that peer review practice in respect of financial supervision has been gradually transformed from the harmonization/convergence paradigm towards the experimentalist paradigm. ESMA, as well as the other supervisory agencies, have been granted new and expanding powers including with respect to direct interventions in the internal market - peer review being one of those new mechanisms. Its original inclusion in the ESMA Regulation provided little guidance on the scope and methodology of such peer review. To the extent that any guidance was provided, it seemed to be consonant with the idea that it would help ESMA achieve the goal of supervisory convergence at national level through ensuring adoption of common rule as well as dissemination of identified best regulatory practices in continuity with the relatively informal Committee of European Supervisory Regulators (CESR). Practice, however, seems to indicate that peer review has evolved and becoming more experimentalist. Instead of focusing on compliance verification, there is an interest now in understanding the reasons for national divergence, identifying problems in national supervisory practice, and the recognition of the need to incorporate market stakeholder input in order both to understand the shortcomings in regulatory practice and to evaluate the fit and appropriateness of proposed solutions.