Peer review in networked financial supervision: the evolution of ESMA’s collegial panopticon

Abstract Peer review is an increasingly common mechanism of transnational regulatory governance. We study the use of peer review in financial supervision in the European Union and its evolution through frequent, if gradual, changes in the review methodology over two decades. The founding legislation designated peer review as a mechanism for supervisory convergence and dissemination of best practices, thereby envisaging that such reviews would have legal and practical effects while providing limited guidance about their conduct. Originally focused on verifying national implementation of common rules and standards, peer reviews have become more qualitative, focused on regulatory practice and efficacy as well as identification of reasons for national divergences. Input to peer review has been expanded to include impacted stakeholders so as to help gauge shortcomings in existing supervisory practice and identify improvements. As such, we demonstrate how peer review has evolved from a mechanism of collegial pressure to conform, into an experimentalist tool for continuous improvement of local regulatory outcomes, thereby also re-embedding European networked agencies into the national oversight of regulators and providing a new vehicle for contesting and politicizing expert decision-making.