A Holistic Approach to the Institutional Architecture of Financial Supervision and Regulation in the EU

43 Pages Posted: 10 Oct 2019 Last revised: 19 Nov 2019

See all articles by Wolf-Georg Ringe

Wolf-Georg Ringe

University of Hamburg - Institute of Law & Economics; University of Oxford - Faculty of Law; European Corporate Governance Institute (ECGI)

Luis Silva Morais

University of Lisbon - School of Law. Jean Monnet Chair – Economic Regulation in the EU

David Ramos Muñoz

Universidad Carlos III de Madrid

Date Written: October 9, 2019

Abstract

A growing consensus has emerged in the post-crisis financial regulatory agenda that the European architecture of financial supervision and regulation is far from ideal. Rather than moving to a ‘holistic’, cross-sectoral regime such as the ‘twin peaks’ model, the post-crisis reform simply upgraded the previous supervisory colleges to EU agencies, resulting in the three sectoral bodies for banking (EBA), securities markets (ESMA), and insurance (EIOPA). The major risk of such a sectoral architecture is that separate agencies may fail to recognise any cross-sectoral problems and risks that are evolving, may fail to adequately address financial conglomerates, and may more generally encounter fundamental challenges in adopting a more holistic approach to financial regulation and supervision.

This paper examines the case for adopting a more integrated architecture in the EU. We show that lawmakers were not only unable to seize opportunities for reform – largely, due to path dependencies – but have also let those opportunities pass by when they presented themselves – such as Brexit or the ESAs review. The present political climate does not leave us to expect any significant reform anytime soon. Therefore, we strongly argue that the reform architecture of the EU should be modified incrementally, and without need for Treaty revision. Hence, a bottom-up experimentalist approach appears as a viable path towards the implementation of a twin peaks model, or, possibly as a more viable and desirable path, a hybrid model that nevertheless preserves some of its main advantages.

Keywords: financial supervision, regulatory architecture, twin peaks model, European Supervisory Agencies

JEL Classification: G28, K22

Suggested Citation

Ringe, Wolf-Georg and Morais, Luis Silva and Ramos Muñoz, David, A Holistic Approach to the Institutional Architecture of Financial Supervision and Regulation in the EU (October 9, 2019). Oxford Legal Studies Research Paper No. 56/2019; European Banking Institute Working Paper Series 2019 – no. 50. Available at SSRN: https://ssrn.com/abstract=3466649 or http://dx.doi.org/10.2139/ssrn.3466649

Wolf-Georg Ringe (Contact Author)

University of Hamburg - Institute of Law & Economics ( email )

Johnsallee 35
Hamburg, 20148
Germany
+49 40 42838 7787 (Phone)
+49 40 42838 6794 (Fax)

HOME PAGE: http://www.ile-hamburg.de

University of Oxford - Faculty of Law

St Cross Building
St Cross Road
Oxford, OX1 3UL
United Kingdom

HOME PAGE: http://www.law.ox.ac.uk/people/wolf-georg-ringe

European Corporate Governance Institute (ECGI) ( email )

c/o ECARES ULB CP 114
B-1050 Brussels
Belgium

HOME PAGE: http://ecgi.global/users/wolf-georg-ringe

Luis Silva Morais

University of Lisbon - School of Law. Jean Monnet Chair – Economic Regulation in the EU ( email )

Alameda da Universidade, Cidade Universitária
Lisboa, 1649-014
Portugal

David Ramos Muñoz

Universidad Carlos III de Madrid ( email )

126, Getafe
Madrid, 28903
Spain

HOME PAGE: http://www.uc3m.es

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