Regulatory cascading: Limitations of policy design in European banking structural reforms

Abstract

This article examines banking structural reforms introduced in the European Union (EU), placed in an international context. The concept of 'regulatory cascading' is put forward to investigate how European policy-makers tackle complex multi-faceted problems, such as that of banks which are 'too big to fail'. The article shows that partial solutions to the problem introduced in other areas of banking regulation, coupled with strategic activism at the domestic level by key EU member states have constrained the opportunities to design a coherent EU framework regulating bank structures. In response to the Commission's proposal for harmonised European banking structural reforms, the Council has stressed in its position two approaches that closely correspond to the measures adopted in France and Germany, on the one hand, and the UK, on the other hand.

Policy capacities and effective policy design: a review

“…The author finds that lack of coordination between member states and EU authorities, besides leading to inherent flexibilities of the regulatory framework, also leads to fuel taxes failing to achieve original climate policy goals. Similarly, Spendzharova ( 2016 ) maintains that disconnect between EU member states and EU authorities in the design of banking structure reforms after the global financial crisis leads to a mismatch in design processes in terms of prioritizing domestic reforms vis-à-vis EU level financial reforms.…”

A pénzügyi közvetítés struktúrájának változásai – a kelet-közép-európai régió speciális fejlődése a nemzetközi és európai folyamatok tükrében

“…Az Egyesült Királyságban, Németországban, Franciaországban és Belgiumban is a Liikanen Report szellemével összhangban álló szabályozást vezettek be. Ezek a szabályok azonban tekintettel voltak arra is, hogy az EU hagyományosan univerzális bankrendszerében 8 a bankok és a piacok összefonódása nem szüntethető meg teljesen, így a bankok tőkepiaci árjegyzői (market maker) tevékenysége 9 továbbra is megmaradt, ami a saját számlás kereskedés tilalmát erősen kérdőjelessé, a strukturális reformokat pedig gyengévé tette (Hardie-Macartney, 2016;Spendzharova, 2016).…”

Post‐crisis reforms in banking: Regulators at the interface between domestic and international governance

“…However, the recent dynamics of international standard setting in banking show that not all jurisdictions that are first‐movers domestically are also pacesetters internationally and vice versa. In the case of banking regulation, the US and the United Kingdom (UK) adopted domestic rules on resolution and bank structure in the aftermath of the international financial crisis (James ; Ryan & Ziegler ; Germain ; Spendzharova ). Subsequently, whereas on resolution these jurisdictions promoted international standards in line with their newly issued national legislation, they did not do so on bank structure.…”

“…Introduced in the UK, ring‐fencing is another approach to simplify banking structures and reduce risk exposure in the deposit‐taking banking entity. The UK reforms require a clear separation of deposit‐taking and investment activities in different legal entities (James ; Hardie & Macartney ; Spendzharova ).…”