Strategic Behaviour and Crisis-Driven Change in Regulation and Governance of the European Financial and Economic System: From Networks to Hybrids
Jerusalem Papers in Regulation & Governance Working Paper No. 63
24 Pages Posted: 11 Aug 2015
Date Written: March 2014
A key challenge that European decision-makers struggle with today is regulating and governing the European financial and economic system in a way that is both effective and legitimate. To help address this challenge, this paper asks why regulatory gaps occurred and European governance has been weak, and how these gaps and weaknesses allowed risky behaviour. It then scrutinizes the regulatory governance structures that have emerged in response, particularly at the EU level, to coordinate the financial and economic system. Two illustrative cases are examined: self-regulation by and national supervision of banks and ‘decentred’ fiscal policy coordination by eurozone countries. We point to strategic behaviour as a key driver of the crisis. We also argue that changes in regulatory governance to curb such behaviour have entailed introduction of some form of hierarchy at the supranational level, yet still combined with strong network characteristics, thus creating or strengthening hybridity in regulatory governance.
Keywords: Agencies, coordination and decision-making processes, financial and economic system, governance, hierarchies, hybrids, networks, (self-)regulation, strategic behaviour
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