Governing finance in Europe: a centralisation of rule-making?

Abstract

Vet du inte, min son, med hur lite visdom världen styrs? Dost thou not know, my son, with how little wisdom the world is governed? (Axel Oxenstierna, 1648) 1.1 INTRODUCTION The governance of finance in Europe is embedded in international regulatory agreements. Especially since the financial crisis of 2008, international agreements have sought to introduce rules to ensure that micro-risks (failures to maintain financial contracts) and macro-risks (contagion, leading to system-stability risks) are reduced. The implementation of international regulations in European regulations and, as a result, in national regulations, has had important repercussions on the regulatory structure of the European Union. Did these changes lead to a centralisation reflected in a shift of formal rule-making and the supervision of its implementation from the national to the supranational level? If so, why did this happen and through which processes? Who wins and who loses from this shift? Finally, what are the implications for political accountability in rule-making? This book's answers to these questions will be provided from different research perspectives and different theoretical backgrounds: political science, law, the sociology of finance and economics. This is crucial in order to grasp the complicated processes that are triggered by regulation and its impact in this most dynamic and globally interlinked of markets. We specify the conditions under which different paths of political, social and economic development are embarked upon leading to different outcomes-that is, centralisation, decentralisation or fragmentation-and their effects. Specifying the condi-1

Jurisdictional arbitrage: combatting an inevitable by-product of cryptoasset regulation

“…Interestingly, another solution to the problem would be States' engagement in regulatory competition. Paradoxically, such competition, which generates a fragmented international regulatory landscape and consequently, an opportunity for jurisdictional arbitrage by the regulated entities (Héritier & Schoeller, 2020), may, also, be a mechanism leading to (often, partial) regulatory convergence (Drezner, 2005) which, in turn, helps to reduce such opportunity (Fleischer, 2010). Thus, a global financial regulatory power, e.g., the EU, engaging in a so-called 'race to the top' by adopting high quality regulation, may persuade the USA, its regulatory counterpart, to adopt a similar regulatory framework or it may attract supporters in the international arena and form a powerful group of countries sharing, in the long term, the same or similar regulatory frameworks (see Drezner, 2005).…”

“…Interestingly, another solution to the problem would be States' engagement in regulatory competition. Paradoxically, such competition, which generates a fragmented international regulatory landscape and consequently, an opportunity for jurisdictional arbitrage by the regulated entities (Héritier and Schoeller, 2020), may, also, be a mechanism leading to (often, partial) regulatory convergence (Drezner, 2005) which, in turn, helps to reduce such opportunity (Fleischer, 2010). Thus, a global financial regulatory power, e.g.…”

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“…Instead, we are pursuing a much more modest aim and focus on individual important pieces of European financial market regulation under MiFID II and CMU under the condition of informational accessibility (Héritier and Schoeller 2020). We first ask which types of regulatory policies are most likely to be challenged through accountability channels?…”

“…Recent studies, however, have shown that despite extensive European regulatory reforms, national authorities still maintain a considerable degree of de facto regulatory power (Helleiner 2014). More precisely, the recent regulatory reforms of European financial market regulation have resulted in different patterns of centralised, de-centralised and even fragmented rulemaking, with regulatory standards mostly set at the European level and effective market supervision carried out at the member-state level (Héritier and Schoeller 2020). In parallel, as always in financial regulation, through self-regulation, co-regulation with regulators and lobbying by interest groups, private actors have provided substantial inputs to the content of European regulations (Helleiner et al 2018;Karremans and Héritier 2020;Smolenska et al 2020).…”

Financial markets regulation: political accountability challenged

“…This led to a certain centralization of regulatory power with the European Commission (EC) and the European Securities and Markets Authority (ESMA). Nonetheless, national authorities still retained a considerable amount of regulatory power and discretion in the implementation of European regulations (H eritier and Schoeller, 2020). What is more, regulation continued to unfold on a parallel basis of private self-regulation and public-private co-regulation.…”