The European Central Bank expressed support on Friday for the European Commission's plan to better integrate EU capital markets through joint supervision, while also cautioning that sufficient staffing and funding must accompany the move.

The push for financial market participants to be supervised at the EU level rather than by individual member states is part of an initiative led by France and Germany. The effort aims to enhance the EU's competitiveness at a time when the bloc is grappling with sluggish economic growth and intense competition from the United States and China.

The ECB's endorsement is expected to send a confident signal to markets and to governments of smaller EU countries, such as Ireland and Luxembourg, which have shown reluctance toward the proposal.

In a formal opinion document, the ECB stated that it fully supports strengthening supervision at the EU level for cross-border financial market participants of systemic importance. This includes major trading venues, central counterparties, central securities depositories, and crypto-asset service providers.

The European Commission has already proposed transferring such supervisory powers from national regulators to the European Securities and Markets Authority (ESMA), which is based in Paris.

In the opinion, which is required as part of the EU legislative process but is non-binding for lawmakers, the ECB said: "The ECB fully supports the relevant Commission proposals, which represent an ambitious step toward deepening the integration of capital markets and financial supervision within the EU."

The ECB also indicated that it should be given a non-voting seat on ESMA’s board, and that its expertise should be taken into account not only in supervisory decisions, but also in the development of technical standards, guidelines, and recommendations.

The central bank emphasized that ESMA must be provided with adequate resources and staff to handle its expanded responsibilities. It further recommended a phased transition from national to EU-level supervision to minimize disruption.

The European Commission's proposal will now be discussed by EU member state governments and the European Parliament. This process is expected to take several months before the measure can be formally adopted as law.