The EU Financial Market Policy: Evolution, Innovation and Research Outlook

Abstract

This paper reviews the process of regulatory integration in the financial markets of the European Union. It shows that the regulatory framework for the single market in financial services has progressed in stages reflecting the evolution of EU policy-modes; from market opening to attempts at harmonization, to reliance on mutual recognition. The slow progress induced the EU to innovate its decision-making processes by introducing the Lamfalussy procedure in 2001. The new procedure accelerated the adoption of new regulations and is being adapted to ensure consistent enforcement across all EU jurisdictions. The next round of challenges to regulatory integration will stem from weak crisis management mechanisms revealed by the current crisis.

Keywords: European Union, financial market, regulation, Lamfalussy procedure

JEL Classification: G20, F02, K23