The Regulation of Financial Markets and the European Social Model

Abstract

This work starts from the assumption that the technical regulation of markets is not objective because any economic rule derives from a prior political approach and responds to a social model. Subsequently, it examines the way in which financial regulation is produced at the international level and enquires into the degree to which fairness and maximization of social welfare are taken (or not) into account in such a process. In particular, this study analyzes how European financial norms and decisions are made and special attention is paid to the mechanisms of democratic control established in the EU in order to evaluate if this normative output reflects the distributional preferences of the citizenry. Three paradigmatic examples of European financial reform (the recovery and resolution of banks, the financial transaction tax and the limits on the remuneration of financial executives) are reviewed to evaluate whether the distributional effects of these new legislation suffice to talk of a social market economy that is coherent with the core elements of the European social model.

Keywords: financial regulation, European Union, social model, bank recovery and resolution, financial transaction tax, remuneration

JEL Classification: F, G