European capital markets are expensive and fragmented. A fund domiciled in Luxembourg that wants to distribute to investors in five member states faces five sets of administrative procedures, five sets of host-authority fees, and varying legal requirements. The average EU investment fund manages €313 million; the average American fund manages €2.3 billion. The gap is not explained by differences in total assets under management — the EU's €20.5 trillion asset management sector is the second largest in the world — but by structure: too many small vehicles operating in too small a patch.
The Market Integration and Supervision Package, proposed by the European Commission on 4 December 2025 and included in the European Council's April 2026 “One Europe, One Market” roadmap, attempts to fix this at the supervisory and regulatory level. The ECON Committee of the European Parliament held a public hearing on the package on 5 May 2026.
The package has three components.
The Master Regulation redesigns the supervisory architecture. For the first time, ESMA — the EU's securities regulator, currently limited to coordination functions — would gain direct supervisory authority over significant cross-border entities in trading and post-trading. This includes major trading venues, central securities depositories, and central counterparties, as well as a new category of entities operating under a proposed pan-European market operator regime. The shift addresses a longstanding structural problem: EU capital markets are supervised by 27 national authorities that do not always apply the same rules with the same consistency.
The Master Directive makes parallel changes in asset management and market access. It targets the barriers that explain why EU funds distribute, on average, in just two member states — a figure that compares poorly to the US market, where a fund can access 340 million investors under a single regulatory framework.
The Settlement Finality Regulation updates the 1998 directive that underpins payment and securities settlement systems, extending its legal protections to new financial instruments including distributed ledger technology and crypto-asset markets.
The fragmentation is documented precisely in an analysis by the European Parliament's Economic Governance and EMU Scrutiny Unit, prepared ahead of the ECON Committee's May 2026 public hearing on the package. EU funds that distribute across borders are on average more expensive than those distributing in a single country: for cross-border equity funds, ongoing charges average 1.36% versus 1.23% for single-country funds; for fixed-income, 0.96% versus 0.77%. Size explains most of the difference — smaller funds carry the same fixed operating costs against a smaller asset base.
The rapporteurs are MEP Markus Ferber of the European People's Party on the Master Regulation, MEP Eero Heinäluoma of the Socialists and Democrats on the Master Directive, and MEP Giovanni Crosetto of the European Conservatives and Reformists on the Settlement Finality Regulation. The target for trilogue agreement with the Council remains end-2026.
Industry bodies have engaged extensively. The Investment Company Institute and the Federation of European Securities Exchanges have both submitted position papers flagging concerns about ESMA's expanded mandate and the proportionality of supervisory transfer. National supervisors, for their part, do not give up jurisdiction easily.
MISP is the most significant structural intervention in European capital markets since MiFID II. The ESMA supervisory transfer is the part with the most political resistance — national supervisors rarely cede authority without a fight — and also the part with the most transformative potential. If agreed without significant dilution, it would create for the first time a truly unified supervisory framework for the EU's largest and most cross-border market participants. The bigger prize is the household savings story: European households hold an estimated €11 trillion in bank deposits. Getting even a fraction of that into productive capital markets — which MISP's structural reforms are designed to enable — is what the Savings and Investments Union was built for. Whether the reform survives trilogue intact is a different question.
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