Eu financial market regulation after the global financial crisis: "More Europe" or more risks?

Common Market Law Review

Volumn 47, Issue 5, 2010, Pages 1317-1383

  Moloney, Niamh ^a  

^a LONDON SCHOOL OF ECONOMICS   (United Kingdom)

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EID: 78049358690     PISSN: 01650750     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Article

References (349)

1. Moloney, "CESR and Supervisory Convergence at Level 3 of the Lamfalussy Process", in Tison, de Wulf, Steenort, and Van der Elst (Eds.), Perspectives in Regulation and Corporate Governance (Cambridge University Press, 2009), p. 449.
2. Notably the stand-off between a regulation-sceptical Commission and an interventionist European Parliament with respect to hedge funds.
3. Commission, White Paper on Financial Services Policy 2005-2010, COM(2005)629.
4. E.g. Committee on Capital Market Regulation, Interim Report (2006) (Paulson Report) and Zingales, "Is the US Capital Market Losing its Competitive Edge?" (2007), available via.
5. E.g. Litvak, "Sarbanes-Oxley and the Cross-Listing Premium" 105 Michigan Law Review (2007) 1857.
6. Commission Communication on Packaged Retail Investment Products (2009), COM (2009)204 (PRIPS Communication), p. 1.
7. The market capitalization of European stock exchanges fell by 5.6 trillion in the 12 months to October 2008: Federation of European Securities Exchanges, Share Ownership Structure in Europe (2008), p. 5.
8. Commission, European Financial Integration Report (2009), SEC(2009)1762 (EIFR 2009), p. 33.
9. Banking sector support was initially directed to bank liabilities and focused on extending deposit guarantee schemes, providing government guarantees for inter-banking lending, and the recapitalization of banks. From early 2009, the focus turned to bank assets and typically took the form of asset removal and insurance schemes: ECB, Annual Report (2009), p. 74.
10. ECB, Annual Report (2008), pp. 99-104.
11. Detailing the major liquidity support operations launched in 2008. Exceptional liquidity support continued throughout 2009, although it is now being reduced. The total value of outstanding ECB refinancing options in 2009 came close to 900 billion: ECB, Annual Report (2009), p. 20.
12. ECB, Annual Report (2009). p.71.
13. Commission, Public Finances in EMU. European Economy 4/2010 (2010), p. 1.
14. Summarized in, e.g., Barber, "Precarious Podium", Financial Times, 19 March 2009, 11.
15. E.g.: FSA, The Turner Review. A Regulatory Response to the Global Banking Crisis (2009) and accompanying FSA Discussion Paper No 09/2, Di Noia and Micossi (with Carmassi and Peirce), Keep it Simple, Policy Responses to the Financial Crisis (Assonime and CEPS, 2009).
16. Brunnermeier, Crocket, Goodhart, Persaud and Shin, The Fundamental Principles of Financial Regulation. Geneva Reports on the World Economy 11. Preliminary Conference Draft (ICMB International Center for Monetary and Banking Studies, 2009).
17. Ferrarini and Chiodini, "Regulating Multinational Banks in Europe. An Assessment of the new Supervisory Framework", ECGI Law Working Paper 158/2010 (2010), available via .
18. The High-Level Group on Financial Supervision, Report (2009) (the DLG Report).
19. Economic and Financial Committee (EFC), High Level Working Group on Cross-Border Financial Supervision Arrangements, Lessons from the Crisis for European Financial Stability Arrangements (2009).
20. Notably, the 2001 Brouwer Report on Financial Stability, produced by the EFC.
21. nd ECOFIN Meeting, 7 Oct. 2007, Press Release No 13571/07.
22. Well-illustrated by Ireland's unilateral extension of its deposit guarantee scheme in autumn 2008. E.g. Dabrowski, "The Global Financial Crisis: Lessons for European Integration" (2009), available via .
23. Hertig, McCahery, and Lee, "Empowering the ECB to Supervise Banks. A Choice-Based Approach", 8 European Company and Financial Law Review (2010), 169.
24. E.g., Cotterli and Gualandri, "Financial Crisis and Supervision of Cross Border Groups in the EU" (2009), available via .
25. Fonteyne et al, "Crisis Management and Resolution for a European Banking System", IMF Working Paper WP/10/10 (2010), available via .
26. Discussion of the wider EU monetary, fiscal, and competition issues raised by the crisis is outside the scope of this article.
27. E.g. Ribstein, "Bubble Laws", 40 Houston Law Review (2003), 77.
28. E.g. Coffee, "Understanding Enron: It's the Gatekeepers, Stupid", 57 Business Lawyer (2002), 1403.
29. Langevoort, "Taming the Animal Spirits of the Stock Markets: A Behavioural Response to Securities Regulation", 97 NorthWestern University Law Review (2002), 135.
30. E.g. Posner, A Failure of Capitalism. The Crisis of '08 and the Descent into Depression (Harvard University Press, 2009).
31. Leading reports include: Turner Review, supra note 15 (UK); HM Treasury, White Paper on Reforming Financial Markets (UK); US Department of the Treasury, Financial Regulatory Reform. A New Foundation (2009) (US); The President's Working Group on Financial Markets, Policy Statement on Financial Market Developments (2008) (US); Financial Stability Forum, Report on Enhancing Market and Institutional Resilience (2008) (international).
32. E.g. Armour and Lele, "Law, Finance and Politics: The Case of India" (2008), available via .
33. [2009] EIFR, supra note 9. Similarly, while the 2009 evaluation of the economic impact of the FSAP (CRA International, Evaluation of the Economic Impacts of the FSAP (2009)) points to some observable market impacts, the link between law and integration is not, even now, clear.
34. As has been repeatedly examined in US scholarship in particular. E.g Romano "The Sarbanes-Oxley Act and the Making of Quack Corporate Governance", 114 Yale Law Journal (2005), 1521.
35. E.g. Schwarcz, "Regulating Complexity in Financial Markets" (2009), available via .
36. Enriques, "Regulators' Response to the Current Crisis and the Upcoming Reregulation of Financial Markets: One Reluctant Regulator's View", 30 University of Pennsylvania Journal of International Law (2009), 1147.
37. A Haldane (Bank of England), "Rethinking the Financial Network". (2009), available via .
38. Lo, "Regulatory Reform in the Wake of the Financial Crisis of 2007-2008" (2009), available via .
39. Avgouleas, "The Global Financial Crisis, Behavioural Finance and Financial Regulation. In Search of a new Orthodoxy", 9 Journal of Corporate Law Studies (2009), 23.
40. E.g. Jackson, "An American Perspective on the UK FSA, Politics, Goals, and Regulatory Intensity" (2005), available via .
41. Jackson, "Variations in the Intensity of Financial Regulation: Preliminary Evidence and Potential Implications", 24 Yale Journal on Regulation (2007), 253.
42. Jackson and Roe, "Public and Private Enforcement of Securities Laws: Resource-Based Evidence" (2008), available via .
43. The Turner Review, e.g., attempted to benchmark the FSA's post-crisis supervisory model against international comparators, but concluded that the crisis had not identified which supervisory models were best equipped to deal with the crisis, given the range of political, market, regulatory, societal and other variables: supra note 15, p. 90 and Discussion Paper 09/2.
44. On the particular risks posed by the securities markets post-crisis see Zingales, "The Future of Securities Regulation" (2009), available via .
45. For a plea for regulators to have the courage to take only the minimum measures required see Enriques supra note 36, and from a policy, market-facing perspective, Committee on Capital Market Regulation, The Global Financial Crisis. A Plan for Regulatory Reform (2009), ch 1.
46. A significant US literature points to the efficiencies which a productive tension between the federal government and the states can generate. E.g. Roe, "Delaware's Competition", 117 Harvard Law Review (2003), 588.
47. Set out recently in the Commission's June 2010 Communication on Regulating Financial Services for Sustainable Growth, COM(2010)301.
48. Washington G20 Summit on Financial Markets and the World Economy, November 2009, Declaration, available via .
49. London G20 Meeting, April 2009, Leaders' Statement, Declaration on "Strengthening the Financial System", available via .
50. Pittsburgh G20 Meeting, Leaders' Statement on "Strengthening the International Financial Regulatory System", available via .
51. See further Moloney, "Confidence and Competence: the Conundrum of EC Capital Markets Law", 4 Journal of Corporate Law Studies (2004), 1.
52. The 2009 EIFR reported that the crisis had a major impact on integration (measured in terms of cross-country dispersion) in the cross-border money-market, equity, and bond markets in particular.
53. Similarly, Pistor, "Host's Dilemma: Rethinking EU Banking Regulation in the Light of the Global Financial Crisis" (2010), ECGI Finance Working Paper No 286/2010, available via .
54. The new reality has been described as a "financial trilemma" - or the incompatibility of a stable financial system, an integrated financial system, and national fiscal autonomy: Schoenmaker, "The Financial Trilemma at Work in Europe" (2010), available via .
55. The Turner Review, e.g., queried whether a "less open single market" might be required, in the form of granting powers to host supervisors to require local subsidiarization in certain circumstances, although it also posited the alternative solution in the form of "more Europe".
56. Similarly, the European Parliament, in its July 2010 position on the proposed European Securities and Markets Authority, described the reform process in terms of "national solutions" (local subsidiarization, which it described as protectionist) or a "European solution" (a reinforcement of pan-EU supervisory structures): infra note 104, Recitals 22d and e. In a similar vein, the Financial Times has argued that "there must either be more harmonized regulation...or.....a shallower common market in which all banks are separately regulated or capitalized": Editorial, "The City has little to fear from the EU", Financial Times, 4 Dec. 2009, 14.
57. The likelihood of a more general retrenchment cannot be ruled out (the pan-EU footprint of EU banks, in particular, has reduced), although the 2009 EIFR was cautiously optimistic.
58. Speech by Commissioner Barnier on "Financial Services in Europe - Where Next?", 31 March 2010 April 2010, available via .
59. Similarly, the Commission is concerned to complete the reform agenda in order to 'preserve and develop the single market and resist pressure for protectionist responses at the national level": June 2010 Communication.
60. See further section 2 infra.
61. See further section 3 infra.
62. Similarly, States seek to keep responsibility over financial policies which aim to prevent crises: Goodhart and Schoenmaker, "Fiscal Burden Sharing in Cross Border Banking Crises", 5 International Journal of Central Banking (2009), 141.
63. ECOFIN discussions on the fiscal responsibility "get-out" clause were an early and major stumbling block to agreement on the supervisory package. The "get-out" clause was adopted in order to meet the concerns of a minority of States (including the UK) on this point, despite an "overwhelming majority" in ECOFIN in favour of empowering the new authorities to take decisions with fiscal implications (Fonteyne et al supra note 25, p. 7), See further section 6 infra.
64. See Dejmek, "The EU Internal Market for Financial Services - A Look at the First Regulatory Response to the Financial Crisis and a View to the Future", 15 Columbia Journal of European Law (2008-2009), 455.
65. Wymeersch, "The Institutional Reforms to the European Financial Supervisory System", 8 European Company and Financial Law Review (2010), 240.
66. The CRD is composed of two measures: Directive 2006/48/EC O.J. 2006, L177/1 (prudential regulation and banking supervision) and Directive 2006/49/EC O.J. 2006 L177/210 (capital adequacy of banks and investment firms).
67. Directive 2009/111/EC O.J. 2009, L 302/97.
68. E.g. Schwarcz, "Markets, Systemic Risk and the Subprime Mortgage Crisis" (2008), available via .
69. Directive 2006/48/EC, Art. 131a.
70. Directive 2009/14/EC O.J. 2009, L 68/3.
71. Regulation (EC) No 1060/2009 O.J. 2009, L 302/1. See further Amtenbrink and De Haan, "Regulating credit ratings in the EU: A critical first assessment of Regulation 1060/2009", 46 CML Rev. (2009), 1915.
72. Proposal for a Directive, COM(2009)207.
73. Commission Recommendation Complementing Recommendations 2004/913/EC and 2005/162 (C(2009)3177) and Commission Recommendation on Remuneration Policies in the Financial Sector (C(2009)3159).
74. COM(2009)362.
75. The Parliament completed its first/single reading in July 2010 (T7-0274/2010), adopting a series of amendments agreed with the Council, and the final Council decision is awaited.
76. The July 2010 Council/Parliament-agreed draft significantly tightens the Commission original model: see sections 4 and 5 infra.
77. A consultation document was produced in February 2010: Commission Services Staff Working Document, Possible further changes to the CRD (2010).
78. COM(2010)284. A proposal is expected by spring 2011 and political agreement by end 2011.
79. Based on an ex-ante scheme funding requirement of up to 1.5% of eligible deposits and ex-post funding, where necessary, based on bank levies (to a maximum of 0.5% of eligible deposits) and a mutual borrowing facility operating between schemes.
80. The Commission's proposal (COM(2010)369) was presented in July 2010 and political agreement is expected by end 2011.
81. COM(2010)289.
82. A Communication is expected in September 2010, a proposal by spring 2011, and political agreement by end 2011.
83. For an extensive analysis of EU crisis management see European Parliament, Study on Financial Stability and Crisis Management in Europe (2007) (IP/A/ECON/IC/2007-069), prepared for the ECON committee by Alexander, Eatwell, Persaud, and Reoch.
84. COM(2009)561/4.
85. [2822nd] ECOFIN Meeting, 7 Oct. 2007, Press Release No 13571/07.
86. th] ECOFIN Meeting, 20 Oct. 2009, Press Release No 14601/09, setting out a roadmap for a financial stability and crisis management regime, and 2981st ECOFIN Meeting, 2 Dec. 2009, Press Release No 16838/09, calling on the Commission to develop a set of early warning instruments.
87. The Communication considers when resolution funds should be used and for what purposes, how bank contributions should be levied, and raises the possibility of a pan-EU fund. A proposal is expected in September 2011.
88. COM(2009)332 and COM(2009)563.
89. Section 7 infra.
90. Commission, Public Consultation on Short Selling (2009). It is particularly concerned with CDSs on sovereign debt.
91. A7-0171/2010, Art. 11.
92. Which has been associated with exacerbating pro-cyclicality over the crisis, although this is contested (see, e.g., Di Noia et al, supra note 15.
93. The endorsement process is based on the Accounting Regulatory Committee's approval of the Commission's endorsement proposal, and on advice from the European Financial Reporting Advisory Group and the Standards Advice Review Group.
94. The most recent consolidated version of the IAS/IFRS standards is at Commission Regulation (EC) No 1126/2008, O.J. 2008, L 320/1.
95. E.g., Commission, Financial Inclusion: Ensuring Access to a Basic Bank Account. Consultation (2009) and Commission, Public Consultation on Responsible Borrowing and Lending in the EU (2009).
96. An updating Communication was published in December 2009 after a series of Commission workshops in autumn 2009. A legislative proposal is expected in spring 2011.
97. Leading to a hostile reaction from FIN-USE: Letter to José Manuel Barosso Concerning User Representation in the de Larosière Group, 3 February 2009.
98. The pre-existing FSAP initiatives on clearing and settlement have also continued to progress over the financial crisis and appear to have been given a significant impetus from the wider focus on financial stability.
99. COM(2009)491. The proposal is currently undergoing the ordinary legislative procedure (previously co-decision).
100. Directive 2003/6/EC O.J. 2003, L 96/16. Commission, Consultation on the Market Abuse Directive, June 2010). A proposal is expected by December 2010 and political agreement by end 2011.
101. Directive 2004/39/EC O.J. 2004, L 145/1 Formal consultation has yet to take place, although the Commission has requested advice from CESR on a range of issues (infra note 160). A proposal is expected in spring 2010, and political agreement by end 2011.
102. Commission, Consultation Document on Modernization of Directive 2004/109/EC, May 2010 (based on the Commission's earlier report to the institutions on the operation of the Directive (COM(2010)243)). See section 7 infra.
103. Most notably in Ireland, where a massive CfD position in Anglo Irish Bank contributed to the instability of the banking system in autumn 2008.
104. Thatcher and Coen, "Network Governance and Multi-level Delegations. European Networks of Regulatory Agencies", 28 Journal of Public Policy (2008), 49.
105. th ECOFIN Meeting, 4 Dec. 2007, Press Release No 15698/07.
106. Including: the support of mediation; the development of information exchange mechanisms; the fostering of delegation; ensuring the effective and efficient function of supervisory colleges; streamlined reporting; cross-sectoral co-operation with the 3L3 committees; and reporting on securities market developments and risks: European Commission Decision C(2009) 176.
107. CESR/08-375d.
108. COM(2009)503 (ESMA); COM(2009)501 (EBA); COM(2009)502 (EIOPA); and COM(2009)499 (ESRB).
109. ECOFIN Meeting 2 Dec. 2009: 16571/1-09 (ESMA); 16748/109 (EBA); and 16749/1/09 (EIOPA). ECOFIN Meeting 20 Oct. 2009: 14491/1/09 (ESRB).
110. Parliament Debate 6 July 2010 outcomes: T7-0270/2010 (ESMA); T7-0272/2010 (EBA); T7-0273/2010 (EIOPA); and T7-0271 (ESRB). ECOFIN adopted a political approach on 13 July 2010 on aspects of the EBA proposal critical to the negotiations across all three ESAs: 11669/10. It also adapted a political approach on the ESRB: 11962/1/10.
111. Report from the Presidency to the Council, 6 Sept. 2010, Proposal for a Regulation of the European Parliament and the Council establishing a European Banking Authority - Presidency Compromise Text (13179/1/10 Rev 1) (September Trilogue EBA Agreement).
112. Report from the Presidency to the Council, 6 Sept. 2010, Proposal for a regulation of the European Parliament and the Council on European Union macro prudential oversight of the financial system and establishing a European Systemic Risk Board - Presidency Compromise Text (12815/10 Rev 1).
113. Report from the Presidency to the Council, 7 Sept. 2010, Note on Omnibus Directive Outstanding Issues (13185/10).
114. Report from the Presidency to the Council on Financial Supervision Reforms, 6 Sept. 2010 (13179/10).
115. th ECOFIN Meeting 7 Sept. 2010, Press Release No 13161/70.
116. Defined under the September Trilogue EBA Agreement as covering credit institutions, investment firms, and financial conglomerates, each as defined in the relevant EU legislation (Art. 2(1)).
117. Including by contributing to a common supervisory culture, ensuring consistent, efficient and effective application of relevant EU law, preventing regulatory arbitrage, mediating and settling disagreements between supervisory authorities, ensuring effective and consistent supervision, ensuring a coherent functioning of colleges of supervisors, and taking action in emergency situations.
118. Omnibus Directive I was adopted by the Commission in 2009 (COM(2009)576) and is undergoing the ordinary legislative process. The Parliament's most recent July 2010 amendments are at T7-0269/2010; agreement was reached on the outstanding issues by the trilogue in September 2010 (supra note 107), although a full draft has not yet been made public. A second Omnibus Directive (Omnibus Directive II) is expected to be shortly adopted by the Commission and will focus on matters related in particular to the securities and insurance markets.
119. Commission, Europe's Financial System: Adapting to Change (COM(2008)122), p. 3.
120. Commission, From Financial Crisis to Recovery: A European Framework for Action, COM(2008)706, p. 4.
121. Commission, Driving European Recovery, COM(2009)114, p. 5.
122. nd ECOFIN Meeting, 7 Oct. 2007, Press Release No 13571/07).
123. Commissioner McCreevy was originally hostile to hedge fund regulation; the Commission's intervention has been associated with political pressure as the financial crisis deepened, particularly from the European Parliament. E.g., House of Lords, EU Committee, 3rd Report of Session 2009-2010, Directive on Alternative Investment Fund Managers, Volume I, pp. 10-11.
124. The June 2010 European Council, e.g., called for the necessary reforms to restore soundness and stability to the European financial system to be completed urgently and called on the Council and Parliament to rapidly adopt the relevant legislative proposals: Presidency Conclusions, para 14. Earlier, the October 2008 European Council, which took place in the teeth of the crisis, affirmed that the Council would take coordinated and thorough action to restore the smooth running of the financial system and supported the range of regulatory reforms being proposed: Presidency Conclusions, paras 1 and 8-9.
125. nd ECOFIN Meeting, 7 Oct. 2007, Press Release No 13571/07.
126. Including that public money not be taken for granted, that direct budgetary costs be shared among affected Member States, that collective costs be minimized, and that national authorities take into account financial stability considerations in other Member States.
127. nd ECOFIN Meeting, 14 May 2008, Press Release No 8850/08, reviewing progress on the recommendation of the 2007 Review.
128. nd ECOFIN Meeting, 8 July 2008, Press Release No 11236/08, e.g., called for governance improvements to the IASB and reviewed progress on the October 2007 roadmap.
129. th ECOFIN Meeting, 7 Oct. 2008, Press Release No 13784/08. This meeting focused on the immediate response of the EU and the Member States to the financial crisis and on the EU's commitment to supporting the stability of the banking system. ECOFIN also, however, supported the Commission's proposals to reform the DGD and the CRD.
130. nd ECOFIN Meeting, 14 May 2008, Press Release No 8850/08.
131. st ECOFIN Meeting, 2 Dec. 2009 Press Release No 1638/09).
132. th ECOFIN Meeting, 20 Oct. 2009, Press Release No 14601/09.
133. nd ECOFIN Meeting, 10 Feb. 2009, Press Release No 6069/09, requesting the Commission to examine short-selling and signaling ECOFIN's support for CESR's actions in this area.
134. th ECOFIN Meeting, 20 Jan. 2009, Press Release No 5196/09) in the wake of the Madoff scandal which highlighted that French investors had been exposed to weaknesses in Luxembourg's depositary regime.
135. Grene, "Luxembourg called on to 'brush up' governance", Financial Times, Fund Management Supplement, 26 Jan. 2009, 3.
136. The FSC has, however, produced a number of key reports on financial regulation in recent years, including, Subgroup on the Implications of ageing on financial markets, Interim Report to the FSC (FSC4180/06) (2006). The FSC was also the addressee of CESR's supervisory convergence reports.
137. Cf. e.g Piris, The Lisbon Treaty. A Legal and Political Analysis (Cambridge University Press, 2010), pp. 118-119 and 235-236.
138. The July 2010 Parliament position on ESMA, eg, includes a some-what self-serving recital (1a) stating that "long before the financial crisis", the Parliament was regularly calling for the reinforcement of a true level playing field, while pointing out "significant failures" in the EU supervisory regime. A somewhat more muted version survives in the September Trilogue EBA Agreement.
139. Resolution with Recommendations to the Commission on Lamfalussy follow-up: future structure of supervision, Annex (A6-0359/2008).
140. E.g. Resolution with Recommendations to the Commission on hedge funds and private equity (A6-0338/2008) and Socialist Group, Hedge Funds and Private Equity - A Critical Analysis (2007).
141. The Parliament added, e.g., remuneration rules for fund managers and a prohibition on naked short sales, increased the levels of disclosure to competent authorities (including with respect to liquidity stress tests and leverage levels), and set out a detailed regime governing the setting of leverage limits by fund managers (Draft Legislative Resolution, June 2010, A7-0717/2010).
142. A7-0208/2010.
143. th ECOFIN Meeting 18 May 2010, Press Release No 9804/10 and Conclusions of the Brussels European Council, 18/19 June 2009, calling for progress on a range of legislative proposals.
144. Presidency Conclusions, Stockholm European Council, 23 and 24 March 2001, Annex 1, Resolution on More Effective Securities Market Regulation, para 3.
145. Regulation 1602/2002 O.J. 2002, L 243/1.
146. Inter-Institutional Monitoring Group, First Interim Report Monitoring the New Process for Regulating Securities Markets in Europe (2003), pp. 8 and 26.
147. Commission, FSAP Evaluation. Part I: Process and Implementation (2005), p. 25.
148. th ECOFIN Council Meeting 18 May 2010, Press Release No 9804/10 and 2972nd ECOFIN Meeting, 10 Nov. 2009, Press Release No 15572/09 (with respect to CRD III).
149. Moloney, How to Protect Investors. Lessons from the EU and the UK (CUP, 2010), pp. 398-425.
150. The 2008 DGD Proposal was not subject to impact assessment, given the crisis conditions under which it was adopted: MEMO/08/622. The 2009 DGD reforms, however, have been subject to a barrage of assessment and consultation, including an informal roundtable of experts in March 2009, three meetings of the Working Group on Deposit Guarantee Schemes, and a range of reports, carried out between 2005 and 2010, by the Commission's Joint Research Centre and the European Forum of Deposit Insurers.
151. Including the CRD II reforms (SEC(2008)2532); the rating agency proposal (SEC(2008)2745); and AIFM Proposal (SEC(2009)576).
152. Which reflects the wider efforts to entrench impact assessment disciplines, including through internal control procedures and the Impact Assessment Board: Alemanno, "The better regulation initiative at the judicial gate: A Trojan Horse within the Commission's walls or the way forward?", 15 ELJ (2009), 382.
153. Which has long been a feature of EU law-making. By the time of the 2005 White Paper, e.g., the Commission had carried out nearly 80 impact assessment but the Parliament and Council had carried out only 1: White Paper, supra note 3, p. 5.
154. E.g., while the ECON Gauzès Report (PE430.709) on the AIFM Proposal makes a large number of material revisions, the Report does not engage in impact assessment.
155. E.g., CESR carried out an earlier consultation on short selling, which lasted for almost three months (CESR/09-581).
156. In particular the industry-based European Securities Markets Expert Group (ESME) which has produced a series of reports on crisis-generation measures, including ESME, Role of Credit Rating Agencies (2008).
157. Prior to its December 2008 hedge fund consultation, the Commission had earlier engaged in extensive consultation following the 2005 Green Paper on Investment Funds, including through an industry based Expert Group on Alternative Investment Funds which reported in 2006.
158. Case C-70/81, European Parliament v. Council, [1990] ECR I-2041.
159. Case C-217/04, UK v. Council and Parliament (ENISA), [2006] ECR I-3771.
160. The Commission's original proposal for the ESAs considered the justification for Art. 114 in some detail, while the Parliament added in a justificatory recital to the ESMA proposal based on the ENISA ruling (supra note 102, Recital10). The September Trilogue EBA Agreement takes a similar approach.
161. Geradin and Petit, "The Development of Agencies at EU and National Levels: Conceptual Analysis and Proposals for Reform" (2004), Jean Monnet Working Paper 01/04, pp. 42-43.
162. Including with respect to: the operational functioning of colleges of supervisors (2010); disclosure in time of stress (2010); risk management (2010); supervisory disclosures (2010); common reporting formats (2010); operational risk mitigation techniques (2009); large exposures (2009); hybrid capital (2009); liquidity buffers (2009); and remuneration (2009). Referenced in Directive 2006/48/EC, Arts. 131a, Arts. 63a. and 110, respectively.
163. Directive 2006/48/EC, Annexes V and XI.
164. E.g. CESR/10-610, which considers how regulatory measures might support the standardization of OTC derivative contracts. CESR also participates in the international OTC Derivatives Regulators' Forum: CESR, Annual Report (2009), p. 53.
165. Commission, Request for Additional Information from CESR in relation to the review of MiFID (MARKT G3/SH/cr Ares (2009)). CESR has subsequently engaged in four major consultations on aspects of the MiFID review: client classification (CESR/10-831); investor protection and intermediaries (CESR/10-417); equity markets (CESR/10-394); and transaction reporting (CESR/10-292).
166. FSF, Enhancing Markets and Institutional Resilience (2008).
167. Including with respect to rating agencies, strengthening co-operation with respect to the surveillance and enforcement of market abuse, facilitating convergent interpretations of IFRS standards with respect to illiquid assets, reviewing market transparency, promoting greater convergence with respect to risk management by investment companies, and reporting on major sources of potential risks: CESR/08-303.
168. It announced its intention to investigate further convergence on short selling, to monitor the impact of the crisis on investment funds, to review the impact of the Lehman collapse, and to address the need for guidance with respect to fair value measurement: CESR/08-791.
169. CESR/09-089.
170. CESR/09-255.
171. CESR/08-437.
172. CESR/10-453 and CESR/10-088 (which followed an earlier consultation (CESR/09581)).
173. CESR/09-1215b.
174. CESR/ 09-348.
175. CESR related the need for its review to the FSF Report, but also to the range of international initiatives being taken concerning market transparency: ibid, pp. 7-10.
176. CESR recommended the Commission consider the adoption of a mandatory trade transparency regime for corporate bonds and for structured finance products and CDSs: at pp. 30 and 49.
177. E.g. CESR, Impact of MiFID on Equity Secondary Market Transparency (2009) (CESR/09-355).
178. It was, e.g. critical of the Commission's 2007 consultation on the regulation of rating agencies, highlighting the failure to engage in impact and assessment and to allow sufficient time for consultation, calling for greater proportionality and less detailed rules, and criticizing the intensity of supervision which the Commission's proposal assumed.
179. E.g. Lavrijssen and Hancher, "European Regulators in the Network Sectors. Revolution or Evolution" (2008), available via .
180. nd ed. (OUP, 2008), pp. 1071-1075 and 1123-1146.
181. E.g. Curtin, "Holding (quasi-) autonomous EU administrative actors to public account", 13 ELJ (2007), 523.
182. The supervisory package does not use the term "agency", relying instead on the less meaningful "authority", perhaps reflecting the constitutional sensitivities. It seems clear, however, that the ESAs are agencies, in that they will have legal personality, be "relatively independent", and will be established under secondary EU law.
183. Griller and Orator, "Everything in Control? The way forward for European Agencies in the Footsteps of the Meroni Doctrine", (2010) EL Rev., 3, 7-9.
184. On the ESAs as European "agencies" see also Chiti, "An important part of the EU's institutional machinery: features, problems and perspectives of European agencies", 46 CML Rev. (2009), 1395, 1427-1428.
185. The ESAs have been described as a "genuinely different arrangement", particularly with respect to their independence.
186. Busuioc, "Accountability, Control and Independence: the Case of European Agencies", 15 ELJ (2009), 599.
187. The ESAs raise a host of complex questions, both constitutional and with respect to their regulatory and supervisory effectiveness, full discussion of which is outside the scope of this article.
188. Masciandaro, Quintyn, and Nieto, "Will they sing the same tune? Measuring convergence in the new European system of financial supervisors" (2009), available via .
189. Rodrigues, "Towards a New European Financial Supervision Architecture" (2009), available via .
190. Recine and Teixeira, "The New Financial Stability Architecture in the EU" (2009), available via , and, for a political perspective, House of Commons, Treasury Select Committee, 16th Report 2008-2009, The Committee's Opinion on Proposals for European Financial Supervision, 2008-2009.
191. E.g. revised MiFID Arts 64 a, and b, inserted by the proposed Omnibus Directive I.
192. Given the useful comparisons which can be made with CESR's activities, this discussion is based on ESMA's powers, although the same regime will apply to all ESAs. It is based on the July 2010 Parliament position, which is the most recent complete draft ESMA Regulation. Reference is made to the September 2010 trilogue position on the EBA Regulation where the trilogue agreement differs from the Parliament position. The trilogue agreement is closely based on the July 2010 Parliament draft, but it significantly finesses the process for the adoption of technical standards. References to Arts. are to the July Parliament draft unless reference is otherwise made to the trilogue agreement.
193. The September Trilogue EBA Agreement follows Art. 8.
194. Case 9/56, Meroni v. High Authority [1957-1958] ECR 133 which, inter alia, provides that discretionary powers involving a wide margin of discretion cannot be delegated by an EU institution and which has struggled with the expansion of the EU "regulatory State". Agencies cannot, accordingly, exercise discretionary powers to adopt rules of general application. In this respect, the ESAs fall into the category of "pre-decision-making agencies with de facto decisionmaking powers" in that they can influence the Commission, Griller and Orator.
195. Reflected in Arts. 7a and 7d of the September Trilogue EBA Agreement.
196. Regulatory capacity has been described as the ability of an actor to further regulatory goals and resolve problems and is characterized in terms of information, expertise, financial and economic resources, authority and legitimacy, strategic position, and organizational capacity: Black, "Mapping the Contours of Contemporary Financial Services Regulation", 2 Journal of Corporate Law Studies (2002), 253.
197. Based on the Parliament's July 2010 draft (T7-0269/2010).
198. The MAD RTS/ITS delegations are similar, with ITS delegations concerning, eg, the template for exchanging supervisory information.
199. Rec. 14 and Arts 7(1) (RTS shall be technical, not imply strategic decisions or policy choices).
200. ESMA will be similarly empowered to adopt ITS concerning when disclosures can be omitted from a prospectus and to adopt RTS with respect to when a supplementary prospectus is required.
201. European Parliament, ECON Report (A7-0171/2010), Art. 25.
202. Infra note 297. These provisions have not been changed by the September Trilogue EBA Agreement.
203. Including with respect to examining trends in the consumer markets, reviewing financial literacy initiatives, developing training standards for the industry, and assessing household and SME credit costs: cited supra note 104, Art. 6a(1).
204. Cited supra note 104, Art. 6a(4).
205. Similarly, Art. 29 Sept. Trilogue EBA Agreement.
206. E.g., the July 2010 Parliament draft requires that the ESMA Chair report to the Parliament when requested (Art. 35) and that the Chair be appointed by the Parliament from a Commission short list (Art. 33). It also provided generally that the ESAs were to be accountable to the Parliament (Art. 1 b). The September Trilogue EBA Agreement, however, provides that the ESAs are to be accountable to the Council and the European Parliament (Art. 1b) and the ESMA Chair be appointed by the ESMA Board, subject to a European Parliament veto (Art. 33).
207. Well-illustrated by the fracas concerning CESR's adoption of "standards" concerning clearing and settlement in 2004; See further Moloney,. Standards on settlement, along with standards for central counterparties, were finally adopted in 2009 (CESR/09-446).
208. Chiti, supra note 179, 1396-1398 and 1418.
209. These provisions have not been changed by the September Trilogue EBA Agreement.
210. Although the ECB's aggressive defence of its independence guarantee (Art. 284 TFEU) should not be overlooked: Case C-11/00, Commission v. ECB [2003] ECR I-7147 (the OLAF case).
211. As well as an ESRB representative, and one representative from the other ESAs.
212. Parliament position July 2010, supra note 104, Arts. 25 and 30. The September Trilogue EBA Agreement follows this approach.
213. E.g., 2822nd ECOFIN Meeting, 7 Oct. 2007, Press Release No 13571/07, relying on EFC recommendations from the EFC's High Level Working Group on Cross Border Financial Stability in addressing cross-border financial stability.
214. Art. 18 of the July 2010 Parliament draft (which is reflected in the September Trilogue EBA Agreement) provides that ESMA may develop contacts and enter into administrative arrangements with supervisory authorities, international organizations, and the administrations of third countries. These arrangements are not, however, to create legal obligations and are without prejudice to the powers of the Member States and EU institutions.
215. The EU is usually represented by either the Commission or the ECB but Member States will also typically be represented, according to the membership rules of the body in question: Bertezzoli, "The EU facing the global arena: Standard-setting bodies and financial regulation", (2009) EL Rev., 257.
216. It is, e.g., represented on the Financial Stability Board.
217. ESA Impact Assessment (SEC (2009) 1234), Annex 1, Table 3.
218. Wymeersch, "The Institutional Reforms of the European Financial Supervisory System. An Interim Report" (2010), available via , 10.
219. The relative merits and drawbacks of consolidated and specialized organization are contested. See, e.g., Wymeersch, "The Structure of Financial Supervision in Europe: About Single Financial Supervisors, Twin Peaks and Multiple Financial Supervisors", 8 European Business Organization Law Review (2007), 237.
220. The roots of modern EU financial regulation can be traced to the 1972 proposal (O.J. 1972, C 131/61) for the 1980 Listing Particulars Directive (Directive 80/380/EEC O.J. 1980., L 100/1) which was based on a uniformity model.
221. Enriques and Gatti, "The Uneasy Case for Top-Down Corporate Law Harmonization in the European Union", 27 University of Pennsylvania Journal of International Economic Law (2006), 939.
222. E.g.: "the FSA's effectiveness should thus [given international harmonization] primarily be judged on the effectiveness of our supervision and not the quality of the rules": Sants (FSA), Speech on "UK Financial Regulation: After the Crisis" 12 March 2010, available via .
223. The competition/harmonization dynamic does not appear to be a feature of the EU crisis-related scholarship, with one or two exceptions. The Financial Times, often a sharp critic of EU harmonization over the FSAP period, opined in an editorial that the power of the new supervisory authorities to engage in rule-making "is needed to prevent regulatory arbitrage: in good times, countries will be tempted to compete for capital by relaxing national rules": Editorial, "Single Market Rules", Financial Times 25 Sept. 2009, 16.
224. The adoption of a single rule book has been characterized by the Commission as expressing two goals: the more consistent implementation of EU law; and the removal of differences in national implementation: Supervisory Package Impact Assessment (SEC(2009)1234, p. 8).
225. E.g., Commission June 2010 Communication supra note 43, p. 4 calling for a "real single Rule Book"; 2981st ECOFIN Meeting, 2 Dec. 2009, Press Release No 16885, referring to the need for a "single set of harmonized rules"; and European Central Bank opinion on the proposed ESMA Regulation, O.J. 2010, C 13/1, para 2.
226. COM(2010)369, Recital 6.
227. COM(2009)207. Recital 9.
228. Commission Services Staff Working Document, Possible further changes to the CRD (2010), pp. 59-62.
229. Including with respect to the accepted market practice defence to market manipulation, the disclosure of inside information, and the disclosure of manager transactions in a company's shares: Commission, Consultation on the Market Abuse Directive, June 2010, pp. 13-16.
230. Commission, Consultation Document on Modernization of Directive 2004/109/EC, May 2010, p. 11.
231. CESR/10-417, pp. 40-42.
232. Including with respect to, inter alia, conflict of interest management, risk management, liquidity management, securitization investments, the independent valuator, delegations by the fund manager, the nature of the annual report to investors, the scope and content of disclosure to investors, and the nature of the reporting obligation to competent authorities.
233. From an extensive literature, e.g. Hertig, "Ongoing board reforms: One size fits all and regulatory capture", 21 Oxford Review of Economic Policy (2005), 269.
234. O.J. 2004, L 385/55 and O.J. 2005, L 52/51.
235. This model might also be described as a form of "coerced" self regulation: Armour and Skeel, "Who writes the rules for hostile takeovers, and why? - The peculiar divergence of U.S. and U.K. takeover regulation", 95 Georgetown Law Journal (2007), 1727.
236. Such as the 2006 Code of Conduct on Clearing and Settlement, which is closely monitored by the Commission through the related Monitoring Group.
237. Commission, Report on Non-equities Market Transparency pursuant to Art. 65(1) of Directive 2004/39/EC on markets in financial instruments (2008).
238. CESR, Transparency of Corporate Bond, Structured Finance Product and Credit Derivatives Markets (2009) (CESR/09-348).
239. Some indications of the Commission's position can be gleaned from its request to CESR for advice on MiFID reform (MARKT.G3/HH/bc Ares (2010), available via .
240. CESR's initial view was that "the voluntary framework of co-operation between CESR and credit rating agencies has proved a successful way to move forward in an environment where there is an absence of regulation": CESR, Annual Report (2006), p. 31.
241. E.g. Financial Stability Forum, Report on Enhancing Market and Institutional Resilience (2008). Similarly, Coffee, "What Went Wrong? An Initial Inquiry into the Causes of the 2008 Financial Crisis", 9 Journal of Corporate Law Studies (2009) 1, at 1-10.
242. Commissioner McCreevy initially appeared reluctant to regulate and reiterated his belief that "'light touch', principles-based regulation is the best approach for the financial sector" but warned that the "scope for conflicts of interest to influence ratings must firmly be addressed": Speech on "Financial Stability and the Impact on the Real Economy", European Parliament's Plenary Session, 5 Sept. 2007, available via .
243. Press Release IP/08/1224. Commissioner McCreevy was "convinced, like others in Europe of the need to legislate in this area at EU level....The crisis has shown that self-regulation has not worked".
244. In its 2010 report on the equivalence of the US and EU rating agency regimes, CESR identified the US regime as being more heavily based on disclosure than the EU regime and suggested that the EU regime depends more heavily on ex ante supervision and on assessment by competent authorities; by contrast, the US regime is more dependent on market monitoring: CESR/10-332, 40.
245. Sect. 6 infra.
246. Consultation on Review of Directive 94/19/EC (2009), pp. 11-12.
247. Proposal, Art. 9.
248. The Commission argued that a pan-EU fund would deliver a series of benefits, including better risk diversification, economies of scale, a reduction in burden-sharing, faster decisionmaking, and a level playing-field, but acknowledged that it would be difficult to support in the absence of an integrated EU supervisory and crisis management system.
249. Including "an independent European credit rating agency" among the list of policy options.
250. CESR/10-331.
251. CESR, Annual Report (2009), p. 45.
252. CESR/09-589.
253. CEBS Annual Report 2009, pp. 17 and 40.
254. Particularly with respect to the parallel banking system, OTC derivatives, and investment funds (including depositary regulation, hitherto outside the UCITS regime).
255. The London G20 Summit, e.g., called for "all systemically important financial institutions, markets, and instruments to be subject to an appropriate degree of regulation and oversight".
256. E.g. Turner Review, supra note 15, pp. 21-22 and 70-73, calling for regulation to focus "on economic substance not legal form" (at p. 73).
257. Early examples include the E Commerce Directive which was developed, albeit within DG Markt, in isolation from other financial market directives and which, by breaking the link between harmonization and passporting rights, caused some difficulties for the developing financial services programme. Similarly, retail market product distribution rules are not aligned across functionally similar products, reflecting in part institutional divisions between insurance, banking, and securities policy development.
258. E.g. Wymeersch, "Global and Financial Regulation. The View of a European Securities Regulator" (2009), available via .
259. E.g. Zaring, "International Institutional Performance in Crisis", 10 Chicago Journal of International Law (2009-2010), 475.
260. IASB/IASC Foundation, Response to the G20 Conclusions (2010).
261. The CRD III trading book reforms, e.g., are closely aligned to Basel reforms: COM(2009)362, pp. 2-3.
262. Basel Committee, Recommendations of the Basle Committee Cross-Border Bank Resolution Group (2009).
263. FSB, Framework for Adherence to International Standards (2010). E.g. FSB, Thematic Review on Compensation. Peer Review Report (2010).
264. Basel Committee, Compensation Principles and Standards Assessment Methodology (2010).
265. E.g. European Council Conclusions, 17 June 2010, confirming the EU's commitment to addressing gaps in regulation supervision at EU-level and in the G20.
266. The Commission has suggested, e.g., that "the EU has taken a leading position in shaping the international response to the crisis", June 2010 Communication, supra note 43, p. 3. Similarly, the Commission's controversial plans for EU bank resolution funds were presented to the Toronto G20 meeting in an effort to shape the international debate: Press Release IP/10/610.
267. Regulation, Arts. 4 and 5.
268. CESR's May 2010 equivalence report on the US rating agency regime (in response to a Commission mandate) concluded that the US regulatory and supervisory regime for rating agencies was "broadly equivalent" but highlighted a number of differences, notably with respect to the disclosure of ratings and the quality of ratings and ratings methodologies. CESR recommended that the identified differences be addressed in order to allow further convergence and that a reduction in divergences might be achieved by amendments to SEC rules. It says much for the sensitivity of equivalence discussions that CESR found it necessary to state that, reflecting the Commission mandate, "it had not taken into account any consideration of a political nature" in its assessment: CESR/10-332, 4.
269. The London G20 Summit called for hedge funds or their managers to be registered and to be subject to disclosure and risk management requirements. The AIFM Proposal, by contrast, imposes a detailed set of rules, including with respect to asset valuation and leverage.
270. In a March 1 letter to the Commission, US Treasury Secretary Geithner warned of the risk of discrimination against US funds, a claim which Commissioner Barnier subsequently rejected (EurActive, 12 March 2010, available via ).
271. Directive 2006/48/EC Art. 22 and Annex V, point 22 (as proposed).
272. FSB, Principles for Sound Compensation Practices (2009).
273. CRD III First Reading, July 2010, T7-0274/2010, Annex V. The new regime imposes what have been described as "the world's toughest restrictions on cash bonuses in banks".
274. Masters, Wiesmann, and Daneshkhu, "Bankers unclear on effect of EU bonus cap", Financial Times, 8 July 2010, 5.
275. FSB, Principles for Sound Compensation Practices. Implementation Standards (2009).
276. Barney Frank, chairman of the House financial services committee (and one of the drivers of the 2010 Dodd-Frank Wall Street Reform Act) described the Parliament as having "gone ...one better ...this is another case where we have to strengthen each other's resolve": Braithwaite, "Top congressman sees boost from US for EU stress tests", Financial Times, 23 July 2010, 7.
277. Directive 2003/6/EC.
278. Directive 2003/6/EC; CESR/04-505 and CESR/09-219.
279. Directive 2003/124/EC; CESR/04-505.
280. E.g. CESR/05-202 and CESR/06-259b.
281. It attempted to co-ordinate national actions, produced a table of national restrictions, and reported to ECOFIN on the prohibitions.
282. Although it has been reported that CESR was consulted on the subsequent German bill to extend the short-selling prohibition beyond transactions in sovereign debt and certain bank securities to a wider range of securities: Wiesmann, Tait, and Wilson, "Germany to extend short selling ban", Financial Times, 26 May 2010, 8.
283. CEBS Annual Report (2009), pp. 9-10.
284. CEBS Annual Report (2009), p. 13.
285. CEBS Annual Report (2009), pp. 17-20.
286. CESR Annual Report (2009), p. 47.
287. As with the rule-making discussion, this discussion is based on ESMA's powers, although similar powers will be conferred on all ESAs. The discussion is based on the July 2010 Parliament draft and the September Trilogue EBA Agreement. References to articles are to the July 2010 Parliament draft, unless, as noted, to the trilogue agreement.
288. References are to the Commission's 2010 proposal to revise the Rating Agency Regulation.
289. Art. 23 allows a Member State to declare that an Art. 10 (or Art. 11) decision impinges on its fiscal responsibilities, leading to suspension of the decision and a procedure which culminates in a Council decision as to whether the decision should stand. The UK led a small group of Member States anxious to retain this safeguard in the face of opposition from France and Germany in particular: Barber and Benoit, "EU set to agree on tighter rules for markets", Financial Times, 18 June 2009, 8.
290. Rec. 34 further specifies that the safeguard clause should not be used in relation to a reduction of income linked to the temporary prohibition of specific activities or products for consumer protection purposes.
291. ESA Impact Assessment (SEC (2009) 1234), p. 24 and September Trilogue EBA Agreement, Recital 20, stating that the Art. 9 power should be limited to exceptional circumstances in which a supervisory authority does not comply with the formal opinion addressed to it.
292. September Trilogue EBA Agreement, Art. 7(4).
293. September Trilogue EBA Agreement, Recital 22.
294. Regulation (EC) No 216/2008, O.J. 2008, L 79/1, Art. 10 and 25.
295. The proposed Omnibus Directive I revisions to MiFID, e.g., allow ESMA to request access to the records of trading kept by investment firms, and require that ESMA is provided with information concerning, e.g., difficulties investment firms experience with third country access and Member States' approach to sanctioning under MiFID.
296. Wymeersch, "The Structure of Financial Supervision in Europe: About Single Financial Supervisors, Twin Peaks, and Multiple Financial Supervisors", 8 European Business Organization Law Review (2007), 237.
297. E.g. Gray, "Is it time to highlight the limits of risk-based financial regulation", 4 Capital Markets Law Journal (2009), 50.
298. CESR/08-220, pp. 7-8 (in the context of the MiFID mapping exercise on supervisory powers and reporting that 19 supervisors adopt some form of risk-based supervision).
299. E.g. Armour, Black, Cheffins, and Nolan, "Private Enforcement of Corporate Law: An Empirical Examination of the UK and US" (2009), available via .
300. Ferran and Cearns, "Non-Enforcement-Led Public Oversight of Financial and Corporate Governance Disclosure and of Auditors", 8 Journal of Corporate Law Studies (2008), 191.
301. Commission, Consultation on the Market Abuse Directive, June 2010, pp. 13-14.
302. Commission Services Staff Working Document, Possible further changes to the CRD (2010), p. 59.
303. Directive 2006/48, Annex V.
304. Peel, "Call for Ban on CDS Speculation", Financial Times, 11 March 2010, 6.
305. Coffee and Sale, "Redesigning the SEC - Does the Treasury Have a Better Idea?" (2008), available via , p. 55.
306. At p. 15.
307. Examples include the transparency report now required of rating agencies, the new annual report requirement likely to be imposed on alternative investment fund managers, and the CRD III requirements for enhanced disclosure on securitization positions.
308. E.g. Avgouleas, "The Global Financial Crisis and the Disclosure Paradigm in European Financial Regulation: the Case for Reform", 4 European Company and Financial Law Review (2009), 440.
309. Schwarcz, "Disclosure's Failure in the Subprime Mortgage Crisis" (2009), available via .
310. Although it has proved troublesome and is under review, the FSA's "treating customers fairly" supervisory strategy for the retail markets, e.g., has considerable strengths, particularly with respect to its focus on consumer outcomes, rather than on rule compliance.
311. The Commission has noted that its dynamic provisioning proposals were "largely inspired by the Spanish model which has proven effective", Commission Services Staff Working Document, Possible further changes to the CRD (2010), p. 45.
312. Commission, Consultation Document on Modernization of Directive 2004/109/EC, May 2010.
313. Regimes can, e.g., be based on aggregating CfD disclosure with share ownership disclosure and can also be calibrated (or delta-adjusted) to reflect the exact relationship between the CfD and the related share.
314. E.g., FSA, Consultation Paper 07/20, Disclosure of Contracts for Difference (2007).
315. The extensive UK approach, e.g., reflects a number of UK-specific influences, including large volumes of trading in CfDs given the stamp duty tax which applies to equity trades.
316. E.g. Gordon, "'Say on Pay': Cautionary Notes on the UK Experience and the Case for Shareholder Opt-in", 46 Harvard Journal on Legislation (2009), 323.
317. COM(2010)284, pp. 17-18.
318. Cheffins, "Did Corporate Governance 'Fail' During the 2008 Stock Market Meltdown? The Case of the S & P 500" (2009), ECGI Law Working Paper No 124/2009, available via .
319. See further Ferrarini, Moloney, and Ungureanu "Executive Remuneration in Crisis: A Critical Assessment of Reform in Europe", 10 Journal of Corporate Law Studies (2010), 73.
320. E.g. BME Consulting, "The EU Market for Consumer Long-Term Retail Savings Vehicles. Comparative Analysis of Products, Market Structure, Costs, Distribution Systems, and Consumer Savings Patterns" (2007), outlining the popularity of life-assurance based products which fall outside MiFID.
321. The investment analyst regime is based on the MiFID Level 2 Directive 2006/73/EC O.J. 2006, L 241/26 (conflict of interest management) and MAD Level 2 Directive 2003/125/EC O.J. 2003, L 339/73. (presentation of investment recommendations).
322. The auditor regime is based on Directive 2006/43/EC O.J. 2006, L157/87.
323. Regulation, Art. 6 and Annex A and B.
324. For an early example see Commission, Note for the Informal ECOFIN Council, Oviedo, 12 and 13 April: A First Response to Enron-related Policy Issues (2002).
325. The international orientation in apparent in Commissioner McCreevy's comments on the proposal's adoption: "No other jurisdiction in the world has demanded such changes.....we will be encouraging the other leading capital markets in the world to adopt a similar approach to us." Commissioner McCreevy, Speech to European Parliament ECON Committee, 1 Dec. 2008, available via .
326. Pre-crisis, eg, the US SEC struggled with the design of a new hedge fund regime: Paredes, On the Decision to Regulate Hedge Funds: The SEC's Regulatory Philosophy, Style, and Mission (2006), available via .
327. For an industry perspective, eg, BVCA Response to House of Lords Enquiry on the Proposal (2009), available via .
328. Some attempts have been made in the September Trilogue EBA Agreement, as noted in section 2 supra.
329. Concerns have, e.g. been expressed about the overwhelming consensus on the importance of catching macro-prudential risk: Plender, "Respinning the web", Financial Times, 22 June 2009, 9.
330. House of Commons Treasury Select Committee, 9th Report 2008-2009, The Banking Crisis, Reforming Corporate Governance and Pay in the City (2009), paras. 258-267. IASB Chairman Sir David Tweedie reported to the Committee that the IASB was subject to a "blunt threat to blow [the IASB] away".
331. In its April 2009 Consultation on CRD IV, the Commission outlined its work on the accounting elements of dynamic loss provision, but acknowledged that this was without preju-dice to the independence of the IASB; stakeholders, however, appear concerned as to the relationship with the IASB's current work on IAS 39/IFRS 9: Commission Services Staff Working Document, Possible further changes to the CRD (2010), pp. 45-46.
332. France, Germany, Italy, and the UK are all members of G20. The EU is the 20th G20 member and is represented by the Council Presidency. Some tensions are evident in the frequent exhortations from ECOFIN and the Commission that the EU speak with one voice at the G20: E.g. Driving European Recovery, supra note 115, p. 16.
333. France, e.g. has been an enthusiastic supporter of the G20 as a means of delivering regulatory reform: Hall, "France fears backsliding on regulation", Financial Times, 13 Feb. 2009, 8.
334. E.g., Grosche and Puetter, "Preparing the Economic and Finance Committee and the Economic Policy Committee for Enlargement", 30 European Integration (2008) 527.
335. E.g. Barr and Miller, "Global Administrative Law: The View from Basle", 17 EJIL (2006) 15.
336. Underhill and Zhang, "Norms, Legitimacy and Global Financial Governance" (2006), available via .
337. Underhill and Zhang, "Setting the Rules: Private Power, Political Underpinnings and Legitimacy in Global Monetary and Financial Governance" 84 International Affairs (2008), 535.
338. E.g. Esty, "Good Governance at the Supranational Scale: Globalizing Administrative Law", 115 YLJ (2006), 1490.
339. In the context of the European Central Bank, Howarth and Loedel, The European Central Bank. The New European Leviathan (Palgrave, 2 ed, 2005), pp. 117-142.
340. nd ECOFIN Meeting, 7 Oct. 2007, Press Release No 13571/07, suggesting key principles for IASB governance, Commission, Contribution to IASCF Constitution Review, and Decision 716/2009/EC O.J. 2009, L 253/8, supporting the financing of the IASCF.
341. The DLG called on the IASB to foster the emergence of a consensus with respect to the contested "mark to market" fair value principle, to open itself up more to the views of the regulatory, supervisory and business communities, and to adopt a far more responsive, open, accountable and balanced governance structure (at 21).
342. The October 2008 fracas was replicated a few years previously in an earlier spat on IAS 39 which led to the Commission carving out from IAS 39 in endorsing the standard, and so threatening the international uniformity of the standard.
343. Pan, "Four Challenges to Financial Regulatory Reform" (2009), available via , outlining the different approaches being taken to systemic risk regulation.
344. This brief outline discussion is based on the September 2010 draft of the ESRB Regulation agreed by the trilogue (supra note 106). For an extensive analysis, including with reference to the soft law structure within which the ESRB will operate, see further Alexander and Ferran, "Can Soft Law Institutions be Effective? The Special Case of the European Systemic Risk Board", (2010) EL Rev., forthcoming.
345. Defined as all financial institutions, markets, products, and market infrastructures (Art. 2).
346. Systemic risk has been very broadly defined as the risk of disruption in the financial system with the potential to have serious negative consequences for the internal market and the real economy (Art. 2). The ECB has suggested that "macro prudential oversight is.....very closely related to the concept of systemic risk, which may arise from the collective behaviour of financial institutions, from their interaction, and from interlinkages between the financial sector and the real economy": ECB, Annual Report (2009), p. 137. But the elements of systemic risk are complex and multi-layered.
347. The voting members will likely comprise the ECB President and Vice President, the Governors of the National Central Banks, a Commission representative, the ESA chairpersons, the chairperson and two vice-chairpersons of the Advisory Scientific Committee, and the chairperson of the Advisory Technical Committee.
348. The 2009 UCITS peer review, e.g., revealed low levels of compliance with CESR guidelines on UCITS notification, with only 5 Member State in full application of the guidelines, and 20 Member States not applying at least 1: CESR/09-1034.
349. E.g. AIMF Proposal, Art. 50; CRD III Parliament/Council Draft (T7-0274/2010), Art. 3(2).