Article

The ‘Old’ and ‘New’ Political Economy of Hedge Fund Regulation in the European Union

Authors:
To read the full-text of this research, you can request a copy directly from the author.

Abstract

This article assesses the ‘old’ and ‘new’ political economy of hedge fund regulation in the EU, explaining why the EU has decided to regulate hedge fund managers in the aftermath of the global financial crisis. A Franco-German alliance, with the support of Italy, other Mediterranean countries and some quarters of the European Parliament, has driven the EU's attempt to regulate hedge funds. The new EU rules are explained by institutionally-shaped economic interests rooted in national varieties of financial capitalism – the ‘old’ political economy of hedge fund regulation. However, ‘ideas’, in the form of competing regulatory paradigms, are instrumental in explaining why one coalition of actors has prevailed over the other in EU rule-making – the ‘new’ political economy of hedge fund regulation.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

... Prior to the international financial crisis of 2008, there were no international standards on hedge funds. To be precise, the IOSCO (1999) and the BCBS (1999) recommended regulating hedge funds indirectly by regulating the banks that did business with hedge fundsand by relying on private sector governance (Pagliari, 2013;Quaglia, 2011). In the wake of the crisis, France and Germany, in particular, advocated the adoption of more stringent rules on hedge funds both internationally and in the EU (Fioretos, 2010;Woll, 2013). ...
... The hedge fund industry sided with the Anglo-Saxon coalition. None of the measures supported by the continental EU member states made it into the final IOSCO report, which was rather brief and general: it put forward six high-level principles for hedge fund oversight (Quaglia, 2011). ...
... In the EU, the regulation of hedge funds was very controversial both before and after the 2008 international financial crisis, pitting continental European countries against the UK. The EU did not regulate hedge funds or fund managers before the crisis, despite the fact that certain member states, first and foremost, France and Germany, had called for the adoption of EU rules on this matter (Fioretos, 2010;Quaglia, 2011). The UK, which hosted the vast majority of hedge funds managers in the EU, blocked any pre-crisis attempts to regulate hedge funds. ...
Article
Full-text available
This article shows that the EU has exerted uneven influence within the global regime complex in shadow banking. Why? We seek to explain the variation in the EU’s ability to exert influence across different elemental regimes—those on hedge funds and securitization—in the broader regime complex over time. In hedge funds regulation, the EU has pursued more stringent international rules, to no avail. In securitization, the EU has been more successful in promoting more lenient regulation at the international level. We focus on the EU’s internal cohesiveness (which can change over time) as the key explanatory variable.
... 63 Nonetheless, it is necessary to remain cautious about generalisations. For example, in the AIFMD negotiations, there was often far more nuance to the UK's, and the other countries' responses; with different domestic preferences also 57 Quaglia (2011); see also Moloney (2016), Section 2. 58 As the terms suggest, market-based economies place an emphasis on competitive market arrangements, market based financing, a limited role for the state and a low degree of regulation. Bank-based economies place greater weight on long-term relationships with banks and other long term finance as well as regulated labour markets. ...
... Bank-based economies place greater weight on long-term relationships with banks and other long term finance as well as regulated labour markets. 59 Buckley and Howarth (2010); Quaglia (2010Quaglia ( , 2011. 60 Clift (2009); Callaghan and Höpner (2005). ...
... 60 Clift (2009); Callaghan and Höpner (2005). 61 Quaglia (2010Quaglia ( , 2011. 62 Buckley and Howarth (2010 varying depending on the issue under the spotlight. ...
Article
Full-text available
The UK’s collective investment scheme (‘CIS’) sector is a key aspect of UK financial services. With the UK’s departure from the EU, it has also become a politically salient topic, with various Member States competing to lure business to their financial centres in the light of Brexit. Brexit prompts hard choices and a key question arising for the CIS industry is whether the UK should continue to shadow EU law or whether elements of regulatory divergence could be envisaged. The paper suggests that, over the short to medium term, the UK should ensure it is likely to be deemed equivalent under EU law. Be that as it may, the paper also suggests that there may be areas within UK CIS regulation where some limited divergence can be considered. This would be provided that the UK remains in line with international standards, and (ideally) continues to be recognisably similar to remain equivalent. This certainly holds true in the event that equivalence is interpreted as more of a holistic assessment that could extend to embrace an element of regulatory competition. Any such divergence could also be framed as being of an optional nature, in order to grant CIS businesses full flexibility with respect to which regime they wish to comply. Writ large, Brexit may also help to stimulate broader conversations about the longer-term challenges the CIS industry faces in today’s world. Viewed in this light, leaving the union could also inspire innovative and proportionate solutions to support and strengthen this pivotal sector.
... The purpose of the article is to evaluate whether the UK succeeded in finding a legislative compromise between its liberal approach and the tendency of the EU Legislature to overregulate, in order to maintain the attractiveness of its internal system for investors and financial operators, both domestic and foreign, also after the transposition of the Directive. 2 Firstly, it is necessary to review the main regulatory innovations introduced by the AIFMD. Then, the UK legislation on AIFMs and on AIFs, which was amended as result of the introduction of the AIFMD. ...
... (a) of the AIFMD; see also Zetzsche [32], who observes that the Directive defines the concept of ''AIF'' introducing a number of explanatory elements and providing a catalogue of activities excluded from its application. 28 An open-ended AIF is an AIF in which its shareholders or unitholders have the right to repurchase or redeem their shares or units out of the assets of the AIF according to the following requirements: (1) at the request of any of its shareholders or unitholders; (2) prior to the commencement of the AIFs liquidation phase or wind-down; and, (3) following the procedures and frequency set out in its instruments of incorporation, prospectus, offering documents or other internal rules. 29 A closed-ended AIF is an AIF not falling within the criteria established for an open-ended AIF, they are only defined as an exclusion of an open-ended one. ...
... Regulation 4, instead, provides the definition of AIFM, as ''a legal person, the regular business of which is managing one or more AIFs''. The AIFM of an AIF, according to the same article, ''may be either: (1) another person appointed by or on behalf of the AIF and which through that appointment is responsible for managing the AIF (''external AIFM''); or, (2) where the legal form of the AIF permits internal management and where the AIF's governing body chooses not to appoint an external AIFM, the AIF itself (''internal AIFM'')''. 64 The same article, additionally, describes the activity of managing AIFs as performing at least risk management or portfolio management for the AIF, whilst, on the marketing of units or shares of AIFs, regulation 45 states that ''an AIFM markets an AIF when the AIFM makes a direct or indirect offering or placement of units or shares of an AIF managed by it to or with an investor domiciled or with a registered office in an EEA State, or when another person makes such an offering or placement at the initiative of, or on behalf of, the AIFM''. ...
Article
Full-text available
The transposition of the AIFMD in the domestic systems of the EU Member States has changed significantly the legal framework of reference for alternative investment fund managers. In transposing the Directive, however, the UK Legislature and Regulator succeeded in maintaining in the internal regulation some elements that could be able to attract financial players and investors from other jurisdictions. The article analyses these peculiarities and argues that due to them the UK financial sector could continue to develop in the future despite some new additional burdensome requirements. Brexit creates an even more challenging playing field that the UK will have to take into consideration.
... Institutional Change after the Great Recession; edited by Luis Cárdenas and Javier Arribas Format: Royal (156 × 234 mm); Style: A; Font: Times New Roman; Dir: C:/Users/IS6557/Desktop/New folder (2)/9780367896980_text.3d; Created: 13/03/2021 @ 21:46:45 one of the EU's responses to the political pressures on the financial industry after the GFC. The UK was one of the main opponents of this legal provision, clearly consistent with continental European governments' preferences and, particularly, with France's and Germany's preferences (Awrey, 2011;Buller & Lindstrom, 2013;Quaglia, 2011). In Europe, the hedge funds industry was highly concentrated in the UK and, therefore, was far more powerful in that country than in any in other within the EU, so it is easy to understand why UK officials would perceive the norm as an external imposition that could undermine national comparative advantage in those industries (Awrey, 2011;Buller & Lindstrom, 2013;James & Quaglia, 2019b;Quaglia, 2011;. ...
... The UK was one of the main opponents of this legal provision, clearly consistent with continental European governments' preferences and, particularly, with France's and Germany's preferences (Awrey, 2011;Buller & Lindstrom, 2013;Quaglia, 2011). In Europe, the hedge funds industry was highly concentrated in the UK and, therefore, was far more powerful in that country than in any in other within the EU, so it is easy to understand why UK officials would perceive the norm as an external imposition that could undermine national comparative advantage in those industries (Awrey, 2011;Buller & Lindstrom, 2013;James & Quaglia, 2019b;Quaglia, 2011;. During the negotiations, concerned about the consequences for the alternative investment funds industry, UK regulators were actively resistant to the adoption of legislation on AIFM at the EU level. ...
... Recent studies of the AIFM directive divide into two camps. A first underlines the cataclysmic effect of the financial crisis, which allowed for a paradigm change in EU financial regulation (Quaglia 2011). According to this view, the crisis brought financial regulation under public scrutiny and challenged beliefs about the benefits of unregulated markets and light--touch regulation (Moschella 2010). ...
... However, the recent financial crisis put into question these principles and gave new credence to the market--shaping coalition. In her analysis of EU hedge fund regulation, Quaglia (2011) points to this shift in ideas as the trigger for the AIFM directive in 2010. The effect of the crisis was to implicitly validate the market--shaping regulatory paradigm and to silence supporters of light--touch regulation. ...
Article
The virulent European Union hedge fund debate led many observers to suspect a paradigmatic battle between liberal market economies and countries in favour of tighter regulation. By contrast, this article points to the economic interests that drove government agendas. However, national preferences were not defined by the aggregate of a country's economic interests, but by very specific stakeholders only, despite the existence of opponents with considerable resources. This article argues that the unequal success of financial lobbyists depended on how their demands fitted into the government's overarching negotiation strategy. The primacy of government objectives, in turn, resulted from the high saliency of financial regulation and hedge funds in particular.
... The Commission launched a consultation on the need for EU regulation on these industries in December 2008 (Commission, 2008). While a small majority of Member State governments accepted unilateral EU action if necessary (Quaglia, 2011), most governments and industry respondents to the consultation preferred the development of international guidelines on these industries. The development of the draft directive was rushed, without the usual preparatory work, from industry consultations to impact assessments, resulting in a highly flawed initial draft. ...
... The British government and most of the AIFM sector were opposed to the draft directive and then led efforts to dilute its most constraining elements. host to 80 per cent of EU fund managers, the United Kingdom sought to maintain the international competitiveness of its financial sector with lighttouch regulation, which also reflected the British Liberal Market Economy (LME) (Quaglia, 2011). The AIFMD was the subject of a considerable lobbying effort on the part of targeted industries -principally hedge funds and private equity funds, but also funds that invest in venture capital, property and commodities. ...
... Along with the review done in the US by the Presidents Working Group (PWG 1999), these documented efforts concluded that hedge funds had to be regulated indirectly. The existing self-regulatory principles were thus strengthened (Lee 2015;Quaglia 2011). ...
... Studies on the interstate level have emphasised the structural rifts between member states, characterised as 'battles of systems' and 'battles of ideas' (Quaglia, 2011a(Quaglia, , 2015a, and the bargaining strategies that decide outputs. It has portrayed member state governments as strategic actors that play the domestic political field by sending different signals to different domestic actors. ...
Thesis
Full-text available
The European Union (EU) has seen a steady expansion of its competences in recent decades: EU institutions now have more capacity to tackle transnational challenges, but their activities also impact EU citizens and governments to a larger degree. At the same time, the EU has become increasingly politicised: EU citizens see more of it, have stronger and more divergent opinions regarding its merits, and are increasingly willing to translate those opinions into political action. This doctoral dissertation studies the consequences of this societal politicisation of the EU on the enforcement of EU policy by examining how it impacts the reputation management practices of the European Commission. It does so in the context of EU economic and fiscal surveillance, a policy area characterised both by high levels of technical and legal complexity, and strong political contestation across audiences in different member states. The central conclusion of this dissertation is that politicisation has both constraining and enabling effects on the enforcement of EU economic and fiscal policy. These effects persist despite the relative complexity of the policy area and the relatively strong political insulation of the Commission.
... Hence, including density in the analysis is meaningful. Firstly, density was expected to increase due to an increase in salience (Quaglia, 2011). As the crisis was considered to be caused by self-regulation and limited oversight, regulators were prone to review financial regulation (Chalmers, 2015). ...
Article
Full-text available
Current scholarship is inconclusive whether stakeholder involvement in regulatory politics can be legitimizing. This article argues that stakeholder involvement can only be legitimizing if bias in mobilization is limited. As bias is limited if a heterogeneous set of stakeholders participates mobilizes , stakeholder mobilization in public consultations on EU financial regulation is examined. Due to the financial crisis and subsequent institutional reforms, stakeholders' perception on who is affected by regulation and the reach of the agencies' operations has changed. Subsequently, mobilization is expected to be more heterogenous. The analysis is based on a novel dataset of stakeholder responses to public consultations of the European Supervisory Authorities before and after the financial crisis and reforms. The results show shifts in interest mobilization, but these do not follow the research expectations. Therefore, the findings show that public consultations do not necessarily decrease bias. As such, consultations show important limits for legitimizing EU regulatory policies.
... Also, tighter regulation covers areas as diverse as securitization, remuneration policies, resolution plans and counterparty credit risk. In addition, regulators have sought to broaden the perimeter of financial supervision, encompassing credit rating agencies and hedge funds (De Haan and Amtenbrink, 2012a,b;Quaglia 2011). ...
Article
Full-text available
The main objective of this study is to discuss the future challenges, dilemmas and tensions as faced by financial supervisors and the governance of financial supervision. We argue in section 3 that ensuring compliance with existing rules and norms is crucial but not sufficient for maintaining financial stability. This implies that the mandate of supervisors has to go beyond ensuring firms’ compliance with existing rules, and that supervisors are given the freedom to do this by the legislative and executive branch of government, as well as by international policymaking authorities. As financial markets constantly evolve and adapt, supervisors should be as vigilant as possible in order to signal and articulate new threats for financial stability, and communicate them (to the extent that this is not counterproductive) to the supervised firms and to the policymaking authorities. We argue in section 4 that supervisors will also need to broaden their scope, focusing on system stability (a macro-prudential orientation) and using more forward looking indicators (such as the firm’s business model, conduct and culture). Finally, in section 5 we argue that the supervisors’ increased room for manoeuvre will also increase demands on methods to ensure their accountability. Supervisors should put more effort in being transparent on their conduct, the effects of supervision as well as the limits of supervision, in order to maintain public and political support. In section 6 we summarise the main arguments and challenges in view of the upcoming changes in financial supervision and its governance as discussed in this study.
... In the last two decades, the hedge fund sector has experienced a spectacular growth: their assets have increased by a factor of 50 since 1990, roughly reaching 2 trillion dollar in 2007 (Quaglia, 2011). Although the assets managed by hedge funds are only a small fraction of the assets held by other institutional investors (King and Maier (2009) note that the assets of hedge funds constitute only 1.5% of those managed by other financial institutions), they are very active and have a significant weight in certain markets. ...
Article
In the last two decades, the hedge fund sector has experienced a spectacular growth, up to the point that it is currently estimated to move more than 50% of the daily volume of stock markets. In contrast to other financial institutions, hedge funds are subject to less restrictive regulations which, in particular, allow them to sell short. As they exploit the asset mispricings, their action is thought to contribute to market efficiency. In this paper we aim at studying the impact that short sales have on the informational efficiency of a financial market. This can be used not only to assess the effect that hedge fund actions have in financial markets, but also the consequences of regulatory measures such as short-selling restrictions or bans. Building on an agent-based market, the simulation results indicate that short sales are beneficial to market efficiency, although the market does not become completely efficient even when all the population can sell short.
... In 2009 (Quaglia, 2011). Like the Lamfalussy expert group a decade earlier, the De Larosière (2009) expert group produced a European financial governance overhaul report (Spendzharova, 2012 (Jones, 2015). ...
Article
Full-text available
During the last 30 years, the financial sectors of the different European Union member states have gradually coalesced toward operating in a single, integrated, European financial space. This paper analyses financial integration by chronicling the process from Jacques Delors' single market project until the recent capital markets union. Drawing on geographical theories of space and scale, the paper collates the large interdisciplinary literature on financial integration with an emphasis on the work of financial geographers. The result is a distinctive geographical perspective on European financial integration intended to inform new rounds of empirical research.
... Studies on the interstate level have emphasized the structural rifts between member states, characterized as 'battles of systems' and 'battles of ideas' (Quaglia 2011a(Quaglia , 2015, and the bargaining strategies that decide outputs. It has portrayed member state governments as strategic actors that play the domestic political field by sending different signals to different domestic actors. ...
Article
Full-text available
Scholarly interest in EU financial regulation and economic governance has increased sharply over the last decade, but the literature on their politics remains fragmented. We present a scoping literature review which systematically locates and aggregates academic articles on their politics in ISI-ranked journals between 1999 and 2016. We identify lacunas in this literature by mapping its strands onto the EU political system. We then present a system-level research agenda that focuses on the cycles of depoliticization and politicization that strongly characterize the politics in these areas. Future research must pay careful attention to the conditions, mechanisms and, especially the venues that (dis)allow the linkage of societal politicization to EU-level politics. This approach is deeply rooted in the specifics of the politics of these policy areas, but also draws on the strengths of research in these areas to increase its relevance for broader debates on the future of the EU itself.
... Eurosceptic views were mostly concentrated within the non-banking sector, particularly amongst investment funds and asset managers. These firms were generally less dependent on passporting into the EU single market, and their experience of Brussels regulation was shaped by post-crisis Franco-German efforts to regulate what they perceived as the vultures of capitalism (Quaglia 2011). As a result, many hedge funds were prominent contributors to the Leave campaign, funding a rival 'City for Britain' group during the referendum, and establishing the pro-Brexit Financial Services Negotiating Forum to counter the influence of the City's official bodies. ...
Article
Brexit poses a profound challenge to the economic fortunes of the financial services sector in the United Kingdom (UK) because it threatens to sever access to the single market in the European Union (EU). Recognising this, the City of London’s largest financial firms and main representative bodies supported a Remain vote in the June 2016 referendum, and subsequently lobbied for a ‘soft’ Brexit policy to preserve the City’s lucrative passporting rights. Despite this, the government led by Theresa May pursued a ‘hard’ Brexit policy which threatened to leave the UK outside the single market. How can we explain the City’s apparent failure to influence the UK’s Brexit policy? We argue that whilst the UK financial sector wielded formidable latent structural power, its capacity to translate this into instrumental influence in the policy process was constrained by three factors: the political statecraft of Brexit, leading the government to downgrade the concerns of the financial industry; the reconfiguration of institutional structures, which undermined the City’s voice within government; and constraints on business organisation, caused by collective action problems and heterogeneous preferences. These three factors constitute important scope conditions which highlight the contingent power of finance in liberal market economies.
... The draft directive was viewed not simply as a politically motivated attack on "Anglo-American" capitalism, but as a deliberate attempt to support the European mutual fund industry, predominantly based in France (23%) and Germany (20%) (Woll 2013). Industry was particularly concerned about the imposition of prescriptive third country equivalence rules that threatened to harm the City of London by locking overseas firms out of lucrative EU markets (Quaglia 2011). In response, the hitherto highly fragmented and weakly organised sector launched a concerted lobbying campaign of UK ministers and regulators. ...
Article
What explains national preferences concerning international and regional financial regulation? This article focusses on one of the main financial jurisdictions worldwide, the United Kingdom (UK). It is puzzling that since the crisis this jurisdiction has pursued stringent harmonised regulation in certain areas (banking), but not others (capital markets). We explain this in terms of how the demands of powerful economic interests are mediated by the political process and regulatory institutions. In banking, there was strong political pressure to restore financial stability, and regulatory institutions were significantly strengthened. This enabled UK regulators to resist industry lobbying and pursue more stringent harmonised rules at the international and European Union levels (“trading up”). In the case of capital markets, by contrast, UK regulators lacked political support for tougher regulation and were institutionally much weaker. As a result, the industry was far more effective in shaping UK preferences aimed at protecting the sector’s competitiveness (“trading down”).
... For these reasons, hedge funds have gained a great deal of economic and political prominence over the last two decades (Quaglia, 2009) Within this framework, the issue of the role and the effect of hedge funds on economic crises is frequently raised, with opposing views arising during and after every financial crisis. ...
Article
Full-text available
The assets of the hedge fund industry are nearly equivalent to the GDP of the UK. The industry, which claims returns independent of markets conditions and has been blamed for economic crises, has attracted the interest of a wide range of financial and political players and academics. This paper, using monthly series performance data since January 1995, at a fund strategy level and S&P500, and a holistic and a developed dynamic correlation quantitative approach, aims to challenge the allegations and the claims, which have been made on rather incomplete research grounds. Statistically, the results strongly reject the claims of the vast majority of fund strategies, excluding the case of the macro and short strategies, over the crisis periods, suggesting that they cannot protect their investors like S&P500. Regarding the allegations, it is inferred that Hedge Funds are used in most cases as a scapegoat rather than actually being the cause of the crises.
... In policy discussions in international fora, two different approaches were apparent: one in After the eruption of the global financial crisis, the international division over how to regulate hedge funds re--emerged in preparations for the April 2009 G20 summit. Several European countries, led by France and Germany and supported by Italy (Reuters, 11 October 2008), pushed for a tougher regulatory regime and for hedge funds to be overseen similarly to banks (Financial Times, 23 February 2009;Quaglia 2011). In contrast, US and UK authorities favoured greater disclosure over more regulation, proposing that hedge funds be required to register with the government and disclose additional information with a view to increase transparency (Wall Street Journal, 14 March 2009). ...
Chapter
Full-text available
... Along the same lines, Quaglina identifies a shift from 'Old' to 'New' politics of financial services regulation in the EU. While the Old politics was 'market making' the New one was 'market shaping' (Quaglia 2012; see also Quaglia 2011). The insider, Jürgen Stark, identified a shift to a 'new normal' in central banking (Stark 2011). ...
Article
The Eurozone crisis brought the European Economic and Monetary Union (EMU) to the brink of collapse; the prevention of this required the use of unconventional measures by the European Central Bank (ECB), the construction of new financial regulatory institutions, and an amendment of EMU laws. These changes culminated in the establishment of a banking union, though not a complete one. This article has two aims. First, it seeks to evaluate to what extent the European crisis management strategy led to a fundamental change in the EMU institutional design. Second, it seeks to identify the key drivers of change, with a focus on the interaction between ECB, the Commission, and Germany.
... In 2009, the European Commission organized a High-Level Conference on Private Equity and Hedge Funds, which brought together representatives of the hedge fund and private equity industries, investors, members of the regulatory community, and other experts in an initiative to review the adequacy of supervisory and regulatory arrangements for all financial market actors in the context of the crisis. 3 As Quaglia (2012) argues, the European Commission did not take this step due to changed interests but because the crisis challenged the 'market-making' and 'competition friendly' paradigm and instead favored the 'market-shaping' approach of the pro-regulation countries. Whitman and Juncos (2012) address the dimension of the EU's enlargement and foreign policy and conclude that the official commitment to enlargement and the European Neighborhood Policy remains unaffected. ...
Article
The European Union (EU) has experienced an unprecedented economic and financial crisis since 2007, the effects of which form the object of analysis in this Special Issue. In particular, it addresses the questions of whether and how the crisis has served as an obstacle or an opportunity for further integration. It concentrates on two broad types of implications for the EU that are central elements of theories on integration and policy and public opinion change. First, the crisis has triggered events of proposed and actual change of policies and institutions. Second, the crisis and the EU’s response to it have had an impact on how citizens perceive the EU and its democratic legitimacy. Based on the contributions by scholars of European integration, this Special Issue concludes that, at least in the short run, the crisis has (overall) created an opportunity structure for European integration rather than an obstacle. At the same time, the contributions show the need for further research on the nexus of public opinion and politicization on the one side and institutional and policy change on the other.
... The (Quaglia 2011). According to the European Commission, the 394 two most controversial policy issues-the scope of the directive and the opening of 395 the European market to funds from third countries after obtaining a European 396 passport-have been settled very closely to its original proposal (Interview 397 European Commission, 9 February 2012). ...
... This article was written while she was a visiting fellow at the European University Institute (EUI) in Florence. We are grateful to Till Kaesbach for comments on an earlier draft. 1 On the ideational dimension of the more typical positions, see Quaglia (2011). 2 'OTC derivatives' are contracts that are traded directly between two parties, without going through an exchange or other intermediary. ...
Chapter
This Chapter concerns standards directly addressed to market players. It analyzes two cases of this type: Credit Rating Agencies (CRAs); Financial Benchmarks (FBMs) and Oil Price Reporting Agencies (PRAs). The common feature of CRA and FBM/PRA standards concerns the fact that an implementation review gauges the extent to which private players—instead of public authorities—comply with IOSCO standards. As a result, these standards gain a sort of ‘supervisory spirit’, notwithstanding their non-binding nature. Importantly, the Chapter reveals the diverging approaches—when relevant—of the EU and the US in these fields.KeywordsIOSCOSupervisory standardsCredit Rating Agencies (CRAs)Financial Benchmarks (FBMs)Oil Price Reporting Agencies (PRAs)
Book
Full-text available
Religia jest istotnym elementem życia społecznego i politycznego. Niezależnie od wyznania, związki religii z polityką są wyraźnie dostrzegalne. Przekonanie to jest udziałem wielu filozofów, od starożytności po współczesność. Prezentowana publikacja stanowi wkład w obszar badań nad związkiem religii i polityki. Teksty zawarte w monografii podejmują aktualne problemy w przedmiotowym temacie. Wszystkie artykułu jednoznacznie wskazują na fakt, iż religia stanowi ważny element życia społeczno-politycznego.
Article
Full-text available
At the heart of the last financial crisis stood the shadow banking system, a mesh of financial activities and entities that grew outside of bank balance sheets but with the support of the banking sector. These activities were not regulated or supervised like banks, and they were characterized by high maturity mismatches and leverage. Two prime elements were Money Market Mutual Funds and Asset-Backed Commercial Papers, which jointly performed bank-like functions. This paper sheds light on the fate of these entities post-crisis and the regulatory dynamics at play as policymakers shifted their focus from constraining their activities to drafting a European regulatory infrastructure that delivers both stability and growth. Based on expert interviews and document analysis, we show how European policymakers opened up to private experts during this shift to learn about the technical complexity of Money Market Mutual Funds and Asset-Backed Commercial Papers, but in the end were restricted in their efforts to craft such regulation due to competing national factions and the legislative time pressure at the European level. We argue that the process was heavily influenced by, first, nationally held visions about the future role of financial markets that came to the fore at pivotal moments during the negotiations, and, second, the specific European institutional set-up and its electoral cycle.
Article
The article stresses the ideological and political dominance of productive capital fractions within the power bloc of the European Union (EU), by exemplifying their strategic influence in transnational struggles over the management of the current crises in Europe. Theoretically, it is shown, that the leadership of a fraction within the ruling class does neither result from its economic dominance in accumulation nor its hegemony in society alone, but rather depends on concrete struggles over power and meaning within the power bloc itself. In this regard, the economic and financial crisis management approach of the EU reveals that especially transnational actors from the European industry are able to use the crisis between 2008 and 2013 to further lock-in their global competitiveness strateg y into EU political structures. While the lobby groups of finance capital, although still economically important, are rather losing political ground and get lost in technocratic disputes among each, productive capital associations are holding the ruling class in Brussels together by using their privileged access to EU institutions and subordinating the interests of others capital fractions under the dominant discourse of a global and export-oriented growth regime of the EU.
Thesis
Extant studies of lobbying in the European Union (EU) by private actors have focused on the legislative arena: how such actors target the Commission, or the Parliament. These works have generally considered lobbyists as uniform transnational capitalist actors, seeking to extend the reach, or depth, of the single market. Recent advances in supranational institutional capacity have begun to create a ‘single European regulatory space’ (Levi-Faur, 2011), through which the EU now seeks to achieve market delivery. However, to date there has been little study of how private actors lobby this new institutional venue. Using the example of the European Banking Authority (EBA) – one of the regulatory institutions in this new arena – this thesis examines the patterns in lobbying behaviour. It takes the cases of British and German banks, and uses the notion of durable variations in domestic contexts to account for differences in their lobbying activities. This approach draws on the work of Hall and Soskice (2001), and posits that domestic financial systems and their associated regulatory regimes shape lobbying in the European regulatory arena. These features of the national landscapes condition banks’ holding, and deployment, of lobbying resources; and shape their beliefs about European bank regulation - meaning that banks engage essentially as national capitalist actors. The thesis uses a variety of qualitative data to investigate these activities and their roots. The findings show that banks’ lobbying behaviours can be seen to remain grounded in their national contexts; and in turn that the strength of these domestic institutional and ideational structures mean that a great deal of lobbying remains distinctly national, even where directed at a supranational venue. Targeting of the EBA is fragmented and contingent.
Article
The international financial crisis was followed by waves of domestic regulatory reforms, first and foremost, in the United States and the European Union. Post-crisis financial regulation was sometimes different across jurisdictions. Moreover, the United States and the European Union sought in various ways to (re)assert their regulatory power not only vis-à-vis the market, but also with regard to other jurisdictions, which often resisted the projection of regulatory power beyond national borders. Consequently, a handful of important post-crisis transatlantic regulatory disputes emerged concerning E.U. rules on hedge funds, U.S. rules on bank structure and E.U. and U.S. rules on over-the-counter (OTC) derivatives. These disputes mainly involved the terms of access to each other's markets, the equivalence between domestic rules, and the extraterritorial effects of those rules. Some of these disputes were also intra-E.U. disagreements, whenever the preferences of the United Kingdom were different from those of Continental countries and similar to those of the United States. The network structure of the financial industry and the patterns of financial interdependence across the Atlantic amplified the extra territorial effects of domestic reforms, but at the same time triggered an active involvement of the transnational financial industry in the management and, eventually, the settlement of these disputes.
Chapter
The chapter investigates the predominant governance modes during the formulation of three EU directives in the wake of the global financial crisis as well as the amount of policy change they introduced. The directives regulate deposit guarantee schemes, alternative investment fund managers, and the investor protection scheme. We illustrate that different governance modes were employed in a sequential or nested order during their formulation. The EU’s financial market reforms were based on technocratic ad hoc committees, negotiations involving all EU legislative institutions, and to a lesser extent on the voting and executive modes. All three reforms tend to strengthen the delegation mode in financial market regulation and supervision. The sequencing and nesting of modes in these three cases casts doubts on assessments that posit close links between issue characteristics and governance modes. Rather than being determined by issue characteristics, the selection of governance modes is strongly influenced by the EU institutional context. There is disagreement on whether the financial market reforms are “gesture politics” or whether they introduce new regulatory paradigm. Based on three indicators of political change–the perceptions of the policy advocates, the frames employed during the policy debate, and the extent of institutional reform–we find that these directives cover a greater scope and tend to be stricter than the previous legal provisions. They are embedded in the new master frame of stabilizing financial markets and enhancing consumer safety. In institutional terms, they are part of a transformation of the EU’s regime for financial market regulation that entails institutional layering and conversion.
Article
The article investigates the character of economic and financial crisis management dynamics in the European Union (EU) between 2007 and 2014. In particular, it explores the main actors and imaginaries structuring European governance processes in reaction to the North Atlantic financial crisis. First, a Cultural Political Economy perspective on power and discourse is developed by drawing on concepts from Neo-Gramscian International Political Economy and Critical Discourse Analysis. Second, concrete EU policy reactions to the crisis are distinguished into three main policy fields of crisis management, with each being examined in terms of the dominant economic forces, policy discourses and political actors that shape them. The article shows that pre-crisis modes of accumulation and regulation of the European economy have been broadly maintained and even sharpened by the crises in Europe. This consolidated reproduction is especially fostered by the evolutionary interplay of dominant transnational social forces from European export- and finance-oriented industries as well as of the established economic imaginary of competitiveness on the EU level. As such, the article argues for a rediscovery of transnational dynamics in European studies of the crisis as these dynamics play a crucial role in coordinating spatial, temporal and institutional varieties in European reactions to the crisis.
Article
The 2007–2009 financial crisis has led to considerable debate about the role of financial industry actors in global regulatory processes. This article seeks to contribute to this debate by assessing when and why financial industry actors mobilise in order to influence securities markets regulations. Do these mobilisation patterns suggest undue influence by a small set of powerful industry actors, or do they reflect the engagement of a more diverse set of actors representing broader public interests? It is argued that variation in mobilisation patterns is a function of: (1) institutional opportunity (the openness and accessibility of regulatory politics); and (2) demonstration effects (how crises increase the salience of regulatory issues). Empirical analyses suggest that the financial crisis diminished the diversity of mobilising actors. This trend, however, is reversed when the news media disseminate information about the costs of weak financial regulation and thereby increase the salience of regulatory issues.
Article
After the global financial crisis, the European Union has adopted a new regulatory approach towards foreign countries by making use of equivalence rules in finance. Why? This paper argues that it is the EU’s attempt to restore financial stability in its territory and maintain the competitiveness of its financial industry. However, this ‘old’ dilemma between stability and competition in financial regulation is further complicated in a regional jurisdiction, such as the EU, because different regulatory paradigms play off in the dilemma.
Article
The European Union is one of the world's largest financial jurisdictions, and after the global financial crisis has been increasingly active in international financial regulatory fora. What affects its ability (or otherwise) to shape international financial regulation? This analysis focuses at the EU level, arguing that the cohesiveness of the EU position has greater analytical leverage than alternative explanations based on market size, regulatory capacity and representation in international fora. Empirically, the article examines a variety of case studies of low, medium and high EU influence across the main segments of the financial sector (banking, securities markets and insurance) after the global financial crisis.
Article
The global financial crisis challenged the existing architecture for financial services regulation and supervision in the European Union (EU). This article first examines the new pieces of legislation that were issued by the EU in the wake of the crisis, as well as substantial revisions of existing EU legislation. Second, it conducts an overall assessment of the reforms implemented and highlights some open issues that were underscored by the crisis and that were only partially addressed afterward. It is argued that the framework for financial regulation and supervision in the EU after the crisis is still poorly equipped to deal with (or to prevent) future financial crises mainly because of the political constraints encountered during the reform process. One of the most important lessons to be drawn is that political factors are as important as (if not more important than) economic factors in shaping financial services regulation and supervision in the EU (and, arguably, elsewhere).
Article
Some five years on from the Autumn 2008 collapse of Lehmans, the regulatory dust from the Global Financial Crisis has settled. Significant regulatory policy debates are still underway internationally, notably with respect to the treatment of shadow banking. 1 But the main contours of the crisis-era regulatory landscape are now clear. Internationally, most major economies, including the EU, have implemented the G20 reform agenda, set out initially in the 2008 Washington Declaration, 2 and covering, inter alia: bank capital, liquidity and leverage; hedge funds; rating agencies; and the over-the-counter (OTC) derivatives markets. That major regulatory change would have followed the financial crisis is not, of course, a surprise. 3 Observation of responses to major financial crises over the years from the 1929 Crash to the 'dotcom bubble' era and beyond 4 makes clear that what Professor Coffee has vividly described as the 'regulatory sine curve' 5 leads to a regulatory boom after financial market bust.
Article
Over the past two decades, the European Union (EU) has become a central actor in financial regulation and developed complex institutions to fulfill its roles. Pre-financial crisis scholarship has provided key insights into the functioning of this institutional cobweb and its evolution over time. However, the financial crisis has highlighted four facets of EU financial regulation (EUFR) that deserve more scholarly attention than they have received so far: (1) the permissive pre-crisis consensus on the merits of financial liberalization and integration, (2) the embeddedness of financial regulation in the political economy of EU integration at large, (3) preference formation of public and private stakeholders in EUFR, and (4) the global economic and regulatory context of EUFR. This paper presents the key scholarly challenges across these four areas. Addressing them promises not only academic insights but also promotes the relevance of EUFR research for real-world policy dilemmas.
Article
Some argue that European financial services regulation is witnessing a shift from a ‘market-making’ to a ‘market-shaping’ paradigm after the global financial crisis. This so-called ‘new’ political economy explanation stresses the role of ideas to understand this change. We consider this claim by providing an in-depth examination of recent European hedge fund legislation from the perspective of two key ‘market-making’ coalition members: the UK government and the hedge fund industry. We accept that the legislation represents a set-back for the ‘market-makers’ but question whether it represents a victory for the ‘market-shapers’. Moreover, we cast doubt on the causal role of ideas, calling for a domestic politics approach.
Article
Full-text available
The highly politicized debate about the recent Alternative Investment Fund Manager (AIFM) Directive of the European Union led many observers to suspect an ideological battle between countries seeking to impose transnational regulation on financial service industries such as hedge funds and liberal market economies insisting on the benefits of market discipline in order to protect their financial centers. The battle that appeared to particularly pit France against the United Kingdom can thus be interpreted as an example of a regulatory paradigm shift in the aftermath of the crisis. This article cautions against such an ideas-centered account of financial regulation and points to the economic interests that drove the French and German agendas. However, contrary to the assumptions of traditional political economy approaches, national preferences were not simply defined by the aggregate of a country’s economic interests. Rather, industry success in shaping government positions on alternative investment regulation crucially depended on how a given industry fit into the government’s overarching geo-political agenda. By highlighting this feedback loop between government strategy and industry lobbying, the paper proposes a strategic analysis of financial regulation, as opposed to accounts that consider positions to be pre-determined by ideas or socio-economic structures.
Article
This article examines the recent development of EU regulatory policy with respect to the alternative investment industry up to and including the adoption of a major new Directive. This Directive is just one part of a much larger package of new EU measures relating to the financial markets but its emergence merits being singled out for three reasons. First, the account of how it came about and what it sets out to do touches upon two overarching concerns that are frequently expressed about laws that are made in the immediate aftermath of a crisis: opportunistic use of crisis situations to achieve unrelated goals, and crisis-induced regulatory overreaction. Second, with the regulation of alternative investments being addressed internationally as well as in Europe, close examination of this area provides revealing glimpses of ways in which key players in the EU policy formation process have simultaneously used the financial crisis to exert influence internationally and used international developments to further an internal agenda. Finally, out of the exceptional level of controversy that surrounded the legislative process for the Directive come some important insights on relations between the EU Institutions and, in particular, on the European Parliament's increasing deftness in putting its mark on EU financial market regulation.
Article
The most significant development in internal market legislation in 2009concerned the regulation and supervision of financial services. This focus isunderstandable. The worst European financial crisis and economic declinesincetheGreatDepressionandunprecedentedEUMemberStategovernmentbail-outs and credit guarantees for a large number of banks created a strongpolitical and populist backlash in many EU Member States against financialinstitutions, and banks in particular (Quaglia
Chapter
Full-text available
Zimmermann. London, Routledge 2009. As noted in the introductory chapter, the global financial crisis that began in 2007 has produced an important shift in the balance of public-private responsibilities in international financial regulation. This paper examines two areas where this trend has been particularly dramatic: hedge funds and derivatives. Although these two sectors were put on the agenda of international regulatory bodies several times over the past two decades, policymakers decided not to take on the task of regulating them directly. They chose instead to rely on market discipline and self-regulatory mechanisms designed by the financial industry. At the outset of the current crisis, the initial international regulatory response followed the same pattern. But in the fall of 2008 and spring of 2009, this situation suddenly changed as policymakers set out new international objectives to place the responsibility to regulate these two sectors squarely on the shoulders of public officials. Although hedge funds and derivatives played a very different role in generating the crisis, with the latter clearly at its core and the former being more a channel of transmission, they were both suddenly brought under the public international regulatory umbrella.
Book
Full-text available
1. Theoretical Perspective: Social Forces and the Struggle Over European Order 2. Global Restructuring, Transnational Capitalism and Rival Projects for European Order 3. The European Roundtable: an Elite Forum of Europe's Emergent Transnational Capitalist Class 4. The Roundtable's Changing Strategic Project and the Transnational Struggle over European Order 5. Transnational Class Agency, the Rise of 'Embedded Neo-Liberalism' and the Evolving European Order References
Article
Full-text available
1 While the post-World War II system (also known as the Bretton Woods system) in most countries had - in line with then prevailing economic policy dogma - imposed capital controls in order to regulate interest rates and manage the domestic economy (as well as protect the new welfare state from capital flight), the 1970s saw stark changes after decades of stability. Technological change in the areas of computerisation, a telecommunications revolution, but above all changes in international markets and politics - such as the breakdown of the system of fixed exchange rates and the two oil-shocks of the 1970s - substantially altered the conditions under which financial markets operated. As most economies were confronted with deep economic crises (spiralling inflation, rising unemployment and sluggish economic growth), economic policy concepts changed. Keynesian ideas, which had guided many countries through the decades following World War II (Hall 1989), were increasingly replaced by economic concepts that focused on supply- side policies rather than the attempt to steer national economies by means of demand-side management. As an increased reliance on markets came to be seen as an antidote to the recessionary environment that had followed the end of the golden age of capitalism in the early 1970s, liberalisation and the abolition of the many barriers that separated national markets were the logical complement in the international sphere. Indeed, governments actively encouraged and engineered the lowering of national barriers, above all in financial markets and banking, for a variety of reasons (Kapstein 1994), for example, by lowering and eventually abolishing capital controls that had relied on the logic of a system of fixed exchange rates. These changes had enormous consequences - indeed, it has been claimed that the 'internationalization and integration of capital markets has been the most
Article
Full-text available
If the European Union (EU) has been an effective bulwark against ad hoc globalization in any economic domain, we may well find evidence from finance, the engine of cross-border economic activity. Yet our study revealed little indication of a distinctive EU approach for regulating financial services industries. Our findings suggest that European decision-makers tried mainly to secure full market integration inside the EU rather than shape regulation to meet a common public purpose, whether at the EU or global level. The policy framework adopted by the EU was essentially modeled on pre-existing United States (US) examples, and does not reflect a transatlantic difference in underlying values. We put forth several hypotheses about why the EU did not seek to manage globalization in the financial services area.
Book
Full-text available
The regulation of financial markets and companies in Europe has undergone significant changes over the last decade. The Commission, Member States, and Parliament constructed regimes that facilitate new legislation, sanction delegation to the Commission for financial market law, and structure the cross-border regulation of companies within the single market. The substance of this book is about that regime development. In creating the regimes discussed in this book, EU leaders contributed to the ongoing constitutionalisation of Europe by contesting and constructing norms. Patterns of normative collision, collusion and coexistence determined whether and what kind of regime emerged. Each of the regimes required an explicit definition of the vertical relationship between the EU and the member states, and of the horizontal relationship amongst the member states. It defined the kind of regulatory state that would be required, the mix of European and national bodies involved, and the procedures they were to follow in carrying out their functions. It also defined what kinds of national variation in related economic and social policy would be regarded as legitimate. As they made these agreements, European leaders simultaneously articulated what it meant to be a member state in the single market, and what it meant to delegate responsibilities to the EU. This constitutionalised these ideals by sorting out the issues of EU and national responsibilities in a powerfully authoritative way. The theory of this book is about demonstrating the normative foundations of these constitutional agreements and showing how they had to be built on the shoulders of national ones. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/politicalscience/9780199579402/toc.html
Article
Full-text available
This paper attempts to lay the ground for an alternative view of economic interest groups’attitude toward European Integration. It starts by presenting a largely sceptical view on interestgroup power which contrasts with both works in the intergovernmental and in thesupranationalist tradition. Drawing on research on banking interest groups, we argue that economic interest groups are unable to state their interests in a changing political environment. Put differently, in an unstable political system, stable variables, i.e.: national variables, remain central.
Article
Full-text available
This article explores what the financial crisis shows about changes in the German and French banking systems, the two largest in continental Europe. In particular, we highlight processes of financialization - defined here as the increased trading of risk. We focus on an apparent contradiction: why did the supposedly more protectionist and conservative German banking system suffer much higher losses than the more liberalized French system? This article also examines the responses of German and French banks and governments to the crisis and speculates how far these responses might limit future financialization and shape national banking systems. Copyright (c) 2009 The Author(s). Journal compilation (c) 2009 Blackwell Publishing Ltd.
Article
Full-text available
The Financial Crisis has intensified the focus on financial regulation at global level, placing it at the top of the G20 agenda. However, global convergence is made more difficult by financial multipolarity, meaning the increased diversity of political preferences reflecting the rise of emerging economies, and financial reregulation, or the trend towards stronger regulation of financial systems to buttress financial stability. In this Policy Brief Nicolas Véron and Stéphane Rottier suggest policy priorities for global leaders in a context where global harmonisation of all aspects of financial regulation cannot be achieved, but action is needed at global level to prevent fragmentation of capital markets. This paper is complemented by the same authors' "An Assessment of the G20's initial action items. Bruegel Policy Contribution 2010/08, September 2010 (on this archive), which assesses the implementation and follow-up of the 47 action items included in the G20's agenda since its first summit in Washington in 2008.
Article
Full-text available
This article represents a first attempt to analyse the forces at work in the transformation of European corporate space, at both the national and supranational levels. In doing so, it consciously combines a comparative with an international political economy perspective and argues against analyses which minimize the role of domestic institutions and understand the contemporary transformation of European capitalism solely in terms of globalization-driven, neo-liberal convergence. After discussing the existing variety of Europe's national capitalisms, we argue that a number of mechanisms are inducing change- competitive pressures on producers; the liberalization and integration of financial markets; the growing role of international actors; and the equally potent role of non-economic domestic actors in internalizing external pressures. We analyse their effects in three critical areas: corporate governance, especially in terms of the balance of power between 'stakeholders' and shareholders; the relationship between the 'public' and 'private'; and the balance between capital and labour in the 'networked' (and especially the 'Germanic') systems. Despite these common pressures, we argue that although the differences between national systems will be modified in a market-liberal direction, this will not result in convergence for the following reasons. Domestically, elites will not promote change to a degree where it will undermine their own power and positions; path dependence and the lock-in effects of historical development create formidable pressures for continuity; and competitiveness will depend on the adjustment rather than abandonment of those structures and policies which have delivered efficiency in the past. As far as external pressures are concerned, international competition and the implementation of European monetary union are as likely to reinforce existing relationships as they are to break them down, while the creation of a new regulatory environment for European capitalism linking supranational with national rules still permits considerable scope for diversity.
Article
Full-text available
The integration of national markets for corporate control continues to lag behind the removal of barriers to trade in goods and services. To what extent does the protracted political battle over legal harmonization in this area reflect a clash of interests between liberal and coordinated national varieties of capitalism? To find out, we map the distribution of political support for liberal takeover rules within and across countries by analyzing a roll-call vote on the takeover directive in the European Parliament in July 2001. Our data show that, in line with the clash-ofcapitalisms hypothesis, nationality did trump party group position on a left–right axis as a predictor of delegates’ attitudes toward takeover regulation. Given the increasing interference of European Union-level legislative initiatives with the regulatory pillars of coordinated market economies, and the accession of 10 new Eastern European member states, we expect the salience of the clash-of-capitalisms cleavage to increase in the near future.
Book
Full-text available
Book description: Money, finance and credit are literally the lifeblood of the modern economy. The distribution of money and credit are essential to productive investment in trade and industry, to the maintenance of consumer purchasing power and demand, to individuals' social status and standard of living, and ultimately to public order. This important new volume provides a wide-ranging discussion of both the potential and the problems arising from the application of multi-level governance literature to the monetary and financial domain. The contributors achieve this through a range of case studies and conceptual discussions of the issues raised by financial and monetary governance, acknowledging that multi-level governance has to take the form of a framework which recognizes a fluid range of scales, and the significance of non-formal institutional and social nodes of authority.
Book
Applying the new economics of organization and relational theories of the firm to the problem of understanding cross‐national variation in the political economy, this volume elaborates a new understanding of the institutional differences that characterize the ‘varieties of capitalism’ found among the developed economies. Building on a distinction between ‘liberal market economies’ and ‘coordinated market economies’, it explores the impact of these variations on economic performance and many spheres of policy‐making, including macroeconomic policy, social policy, vocational training, legal decision‐making, and international economic negotiations. The volume examines the institutional complementarities across spheres of the political economy, including labour markets, markets for corporate finance, the system of skill formation, and inter‐firm collaboration on research and development that reinforce national equilibria and give rise to comparative institutional advantages, notably in the sphere of innovation where LMEs are better placed to sponsor radical innovation and CMEs to sponsor incremental innovation. By linking managerial strategy to national institutions, the volume builds a firm‐centred comparative political economy that can be used to assess the response of firms and governments to the pressures associated with globalization. Its new perspectives on the welfare state emphasize the role of business interests and of economic systems built on general or specific skills in the development of social policy. It explores the relationship between national legal systems, as well as systems of standards setting, and the political economy. The analysis has many implications for economic policy‐making, at national and international levels, in the global age.
Chapter
Applying the new economics of organization and relational theories of the firm to the problem of understanding cross‐national variation in the political economy, this volume elaborates a new understanding of the institutional differences that characterize the ‘varieties of capitalism’ found among the developed economies. Building on a distinction between ‘liberal market economies’ and ‘coordinated market economies’, it explores the impact of these variations on economic performance and many spheres of policy‐making, including macroeconomic policy, social policy, vocational training, legal decision‐making, and international economic negotiations. The volume examines the institutional complementarities across spheres of the political economy, including labour markets, markets for corporate finance, the system of skill formation, and inter‐firm collaboration on research and development that reinforce national equilibria and give rise to comparative institutional advantages, notably in the sphere of innovation where LMEs are better placed to sponsor radical innovation and CMEs to sponsor incremental innovation. By linking managerial strategy to national institutions, the volume builds a firm‐centred comparative political economy that can be used to assess the response of firms and governments to the pressures associated with globalization. Its new perspectives on the welfare state emphasize the role of business interests and of economic systems built on general or specific skills in the development of social policy. It explores the relationship between national legal systems, as well as systems of standards setting, and the political economy. The analysis has many implications for economic policy‐making, at national and international levels, in the global age.
Chapter
The making of the European financial area is the clearest contemporary example of how states, regulatory authorities, and networks of market interests can combine to redefine the boundaries of financial markets in terms of both space and characteristics. By forging the single market for financial services as a major part of the Single Market Programme (SMP) of the then European Communities, the EU member states and their various financial market constituencies agreed to extend markets across political boundaries in ways once thought impossible or at least very unlikely. The EU negotiators of the legislation proposed in the 1985 Commission White Paper and of the 1986 Single European Act1 transformed a number of relatively closed and restricted domestic financial markets into a desegmented, transnational financial space contiguous with global markets.
Article
The global financial crisis that reached its peak in late 2008 has brought the importance of financial services regulation and supervision into the spotlight. This book examines the governance of financial services in the EU, asking who governs financial services in the EU, how and why, and explaining where the power lies in the policy-making process. It covers the main financial services: banking, securities, payments systems, clearing and settlement. Addressing the politics and public policy aspects of financial market integration, regulation and supervision in the European Union, this book conducts a theoretically-informed and empirically-grounded analysis of financial services governance from the establishment of Economic and Monetary Union (1999) and the launch of the Financial Services Action Plan (1999), to date. It also assesses the EU responses to the global financial crisis. Providing a reliable and unique insight into the politics of financial services regulation in the EU based on an extensive programme of interviews with policy makers and stakeholders across Europe, the book will be of great topical interest to students and scholars of European Union studies, political science and political economy.
Article
Since the early 1990s, Europe's economies have been facing several new challenges: the 1992 single market programme, the collapse of the Berlin wall and eastward enlargement, and monetary unification. Building on the influential Varieties of Capitalism (VoC) perspective, this book critically analyses these developments in the European political economy and their effects on the continental European economies. The chapters include debate about how VoC can help understand the political-economic challenges that Europe is facing today, and how understanding these new challenges can in turn enrich and enhance the VoC perspective. Thematically, the contributions to this volume are organised in four sections: how the macro-economics of EMU influenced different European models of capitalism; how the Single Market programme was received in the different institutional regimes in European capitalism; how welfare and labour market reforms are debated and implemented; and how European capitalism travelled east after 1989. The book aims to demonstrate that the VoC approach remains - as the editors put it in their introduction - a rich seam to mine, capable of accommodating new developments, and theoretically flexible enough to branch out into new arguments.
Article
Why has the completion of the single market in financial services proved so difficult and time consuming? This paper addresses this question by evaluating the explanatory power of a revised version of the 'advocacy coalition framework' against the empirical record of the policy-making processes of key pieces of legislation dealing with securities trading in the EU. The findings suggest that in almost all the Lamfalussy directives, the main (but, by no means, the only) line of division was between a 'market-making' coalition and a 'market-shaping' one. This was owing to differences in the national regulatory frameworks, the configuration of national financial systems and their competitiveness (hence, 'interests'). However, the tension was also a consequence of different belief systems (hence, 'ideas') about financial services regulation. The latter have undergone a significant reappraisal as a result of the global financial crisis.
Article
Europe is a heavyweight in global finance. But does it have a presence in global financial governance to match? This paper employs a principal-agent approach to analyse patterns of policy-making delegation in the EU to explore this question. It finds a U-shaped relationship between the extent of delegation and the 'European presence' in global financial governance: when member states either remain in control of policy or delegate extensive competencies, European stakeholders are well represented. In contrast, intermediate levels of delegation can undermine the European presence by tying member states' hands without sufficiently empowering supranational agents to fill the gap. Patterns of delegation are traced to the heterogeneity of member state interests and the pre-existence of international governance arrangements. These arguments about the origins and consequences of delegation patterns are supported by evidence from three core domains of financial governance: banking regulation; accounting standards; and capital market regulation.
Article
After years of acrimonious debate among leading industrialized states, the G20 reached an agreement in 2009 on the regulation of hedge funds. Anchored in an institutional theory of government action that draws on historical institutionalism, this article finds that cleavages between liberal market economies (US, Britain) and organized market economies (Germany, France) determined the failure to regulate hedge funds in the 1990s, the origins of a self-governance regime in the mid-2000s, as well as the nature of the G20 agreement in 2009. Historical institutionalism offers an important complement to theoretical traditions in international political economy (IPE) that stress the role of states’ market power in shaping international regulatory regimes, especially in accounting for how the evolution of state preferences affect the nature of international regulation over time. The article concludes with suggestions for how historical institutionalism can be extended beyond its typical purview in comparative politics to give analytical and substantive nuance to the study of international market regulation.
Article
Contemporary analyses commonly attribute the global credit crisis to faulty regulation. What have been the roots of these deficient rules, particularly in Europe, where rapid spill-over from US markets took policy makers and observers by surprise? This article focuses on regulatory liberalism as the paradigm guiding European Union (EU) regulation. It has dominated regulatory thinking for decades, but it has been implemented throughout Europe only since the mid-1990s. This shift can be traced to political institutions that have filtered policy ideas. EU financial reforms have pushed policy from pragmatism, under which it was adapted to political contingencies, to dogmatism, which adapts it to the intellectual exigencies of rigid policy paradigms. Inadvertently, reforms had created an epistemic community in which ‘professional’ rule setters systematically ignored external criticisms. The institutionalised ambition to craft ‘intellectually sound’ policy–rather than policy that simply ‘works’ –generated rules that persistently ignored the financial markets' self-reflexivity and thereby aggravated the crisis.
Article
This article examines the model of social learning often believed to confirm the autonomy of the state from social pressures, tests it against recent cases of change in British economic policies, and offers a fuller analysis of the role of ideas in policymaking, based on the concept of policy paradigms. A conventional model of social learning is found to fit some types of changes in policy well but not the movement from Keynesian to monetarist modes of policymaking. In cases of paradigm shift, policy responds to a wider social debate bound up with electoral competition that demands a reformulation of traditional conceptions of state-society relations.
Article
The focus of this article is, on the way by which an integrated financial market has been established and politically organised at the European level thus far. It should be shown that the making of the finance-led regime takes place as a transnational process, which-despite general consensus-is still conflict-ridden, fragile and far from complete. To clarify this, the argument provided here has the following structure. First, it will be explained very briefly how a critical, historical materialist approach to European integration based on the assumption that integration takes place as a succession of negotiated settlements might offer a deeper understanding of the project of financial market integration. Thereafter, it will be explained how the project of financial market integration has come about. Here the most important initiatives which it placed on the European agenda, as well as the underlying problems, strategies, and political solutions, will be reviewed and summarised. Then it will be shown that all the choices, which have been made in the context of financial market integration, far from simply follow the logic of unavoidable adaptation. On the contrary, the perception of problems, challenges and political solutions is always mediated by specific discourses which, under the leadership of the European Commission and the transnational business community, are influenced by a range of social and political forces. So far, those forces which are highly supportive of an integrated financial market based on liberal principles have been politically and discursively predominant. However, the final section shows that finance-led capitalist restructuring tends to aggravate societal contradictions and potential conflicts. This might contribute to a (re-)opening of a broader European debate, in which societal needs and the need for democratic control of financial market developments will be more vigorously emphasised.
Article
This article develops a twofold critique: on the one hand it addresses those accounts commonly associated with the Varieties of Capitalism literature and their associated understanding of neo-liberalism to argue that there is a dominant tendency to collapse into a binary analysis that asserts either we are witnessing convergence or we are experiencing path dependency. On the other hand it addresses ‘neo-Gramscian’ accounts which tend to overemphasise processes of transnational convergence and the emergence of a transnational capitalist class at the expense of the embeddedness of capital in national-domestic contexts. On this basis, it is argued that several contributions within political geography pose meaningful questions about the premise that neo-liberalism is inherently variegated. Principally, this involves developing the notion of variegated neo-liberalism to analyse the dynamics of a contingent neo-liberal consensus between transnationally-oriented fractions that both drives EU reform in a neo-liberal direction and reinforces domestic linkages organic to the national context. As a result, the article suggests we therefore reject the notion of a transnational capitalist class somehow detached from the national.
Article
The article explains a curious turn in European political economics. Between 1995 and 2005 national financial elites in twelve Western European countries created almost twenty competing new stock markets designed to improve financing alternatives for entrepreneurial companies. For a region supposedly averse to risk and U.S.-style capitalism, it is surprising that most of the new markets were modeled on the U.S.-based Nasdaq Stock Market, an iconic American institution. The author's structured comparisons of the new markets to one another, to previous ones, and to proposals that never saw the light of day reveal that the primary causes behind the creation, form, and timing of Europe's new markets lie in the political skills, motivations, and actions of supranational European Union bureaucrats. Challenging leading social science explanations for the cross-border convergence of domestic institutions, these findings show that the accumulated effects of day-to-day action by these supranational bureaucrats are potential causes of institutional innovation. The argument adds to a growing body of detailed empirical research on the domestic and global impact of the European regional polity and contributes to scholarly debates about market formation.
Book
In this path-breaking book, the author argues that European countries' political-economic policies, practices, and discourses have changed profoundly in response to globalization and Europeanization, but they have not converged. Although national policies may now be more similar, especially where they follow from common European policies, they are not the same. National practices, although moving in the same general direction toward greater market orientation, continue to be differentiable into not just one or even two but three varieties of capitalism. And national discourses that generate and legitimate changes in policies and practices not only remain distinct, they matter. The book is a tour de force which combines sophisticated theoretical insights and innovative methods to show that European countries generally, but in particular Britain, France, and Germany (for which the book provides lengthy case studies), have had very different experiences of economic adjustment, and will continue to do so into the future. Available in OSO: http://www.oxfordscholarship.com/oso/public/content/politicalscience/0199253684/toc.html
Article
From the vantage point of the key powers in global finance including the United States, the European Union, Japan, and China, this highly accessible book brings together leading scholars to examine current changes in international financial regulation. They assess whether the flurry of ambitious initiatives to improve and strengthen international financial regulation signals an important turning point in the regulation of global finance. The text: * Examines the kinds of international reforms have been implemented to date and patterns of international regulatory change. * Provides an analysis of change across a number of financial sectors, including the regulation of hedge funds, derivatives, credit rating agencies, accounting, and banks. * Offers an explanation of contemporary regulatory developments with reference to inter-state power dynamics, domestic politics, transgovernmental networks, and/or transnational non-state forces. Providing the first systematic analysis of the international regulatory response to the current global financial crisis, this ground-breaking volume is vital reading for students and scholars of international political economy, international relations, global governance, finance and economics.
Article
This article focuses on the EU Takeover Directive and its transposition into French law. French outcomes diverge from European Commission aspirations for greater clarity and uniformity. The clash of European capitalisms as well as heightened uncertainty and differentiation in takeover regulation exacerbate problems of asymmetric vulnerability of EU states (and firms) to the European Commission's liberal reform agenda. This explains the failings of EU-level harmonization of varieties of capitalism and corporate governance. Copyright (c) 2008 The Author(s). Journal compilation (c) 2008 Blackwell Publishing Ltd.
who was the rapporteur for the AIFM directive, inserted an amendment that required depositories to be in the same country as the AIF – which is the French stance in Council and also happens to be the business model of
  • For
  • French
  • Jean
For example, the French MEP Jean-Paul Gauzes, who was the rapporteur for the AIFM directive, inserted an amendment that required depositories to be in the same country as the AIF – which is the French stance in Council and also happens to be the business model of the French industry – e.g., onshore depositories.
Letter to the President of the European Commission Barroso
  • Poul Rasmussen
  • Martin Nyrup
  • Schulz
  • Pervencheberè
Rasmussen, Poul Nyrup, Martin Schulz, and PervencheBerè s (2008). Letter to the President of the European Commission Barroso, 16 December.
The Regimes of European Integration: Constructing Governance of the Single Market European Parliament (EP) (2008a) Report of the European Parliament with Recommenda-tions to the Commission on Hedge Funds and Private Equity (the 'Rasmussen' report)
  • Brussels February
  • Donnelly
  • Shawn
February, Brussels. Donnelly, Shawn (2010). The Regimes of European Integration: Constructing Governance of the Single Market. Oxford: Oxford University Press. European Parliament (EP) (2008a). Report of the European Parliament with Recommenda-tions to the Commission on Hedge Funds and Private Equity (the 'Rasmussen' report), A6-0338/2008. European Parliament (EP) (2008b). Report of the European Parliament with Recommenda-tions to the Commission on Transparency of Institutional Investors ('Lehne' report), A6-0296-2008.
The Fundamental Principles of Financial Regulation'National Filters: Europeanisation, Institutions, and Discourse in the Case of Banking Regulation
  • Markus K Brunnermeier
  • Andrew Crockett
  • Charles A Goodhart
  • Avinash Persaud
  • Hyun Song
  • Shin
Brunnermeier, Markus K., Andrew Crockett, Charles A. Goodhart, Avinash Persaud, and Hyun Song Shin (2009). 'The Fundamental Principles of Financial Regulation', Geneva Reports on the World Economy, 11. Busch, Andreas (2004). 'National Filters: Europeanisation, Institutions, and Discourse in the Case of Banking Regulation', West European Politics, 27:2, 310–33.
Martin Schulz, and PervencheBerè s (2009) Letter to the President of the European Commission Barroso
  • Rasmussen
Rasmussen, Poul Nyrup, Martin Schulz, and PervencheBerè s (2009). Letter to the President of the European Commission Barroso, 20 April.
Transnational Capitalism and the Struggle over European IntegrationVarieties of Global Financial Governance? British and German Approaches to Financial Market Regulation Global Finance in Crisis
  • Van Apeldoorn
  • Bastian
Van Apeldoorn, Bastian (2002). Transnational Capitalism and the Struggle over European Integration. London: Routledge. Zimmermann Hubert (2010). 'Varieties of Global Financial Governance? British and German Approaches to Financial Market Regulation', in E. Helleiner, S. Pagliari, and H. Zimmerman (eds.), Global Finance in Crisis. London: Routledge, 121–38.
Letter to Mirek Topolanek The Futures of European Capitalism Political Economy of Financial Integration in Europe: The Battle of the System Casino Capitalism
  • Sarkozy
  • Nicolas
Sarkozy, Nicolas, President of the Republic, and Angela Merkel, Chancellor of Germany (2009). Letter to Mirek Topolanek, Prime Minister of the Czech Republic and Jose Manuel Barroso, President of the European Commission in Preparation for the G-20 Summit, 16 March. Schmidt, Vivien A. (2002). The Futures of European Capitalism. Oxford: Oxford University Press. Story, Jonathan, and Walter Ingo (1997). Political Economy of Financial Integration in Europe: The Battle of the System. Manchester: Manchester University Press. Strange, Susan (1997). Casino Capitalism. Manchester: Manchester University Press. Hedge Fund Regulation in the EU 681 Downloaded by [Laurentian University] at 12:20 05 October 2014
Global Finance in Crisis
  • Helleiner
  • Stefano Eric
  • Hubert Pagliari
  • Zimmerman
Helleiner, Eric, Stefano Pagliari, and Hubert Zimmerman, eds. (2010). Global Finance in Crisis.
The Future of EU Financial Regulation and Supervision. London: The Stationery Office Hedge Funds and Other Highly Leveraged Institutions The Regulatory Environment for Hedge Funds, A Survey and Comparison, Final Report Hedge Funds Oversight
  • London
London: Routledge. House of Lords (2009). The Future of EU Financial Regulation and Supervision. London: The Stationery Office. International Organization of Securities Commissions (IOSCO) (1999). Hedge Funds and Other Highly Leveraged Institutions, November. International Organization of Securities Commissions (IOSCO) (2006). The Regulatory Environment for Hedge Funds, A Survey and Comparison, Final Report, November. International Organization of Securities Commissions (IOSCO) (2009). Hedge Funds Oversight, 22 June. Jabko, Nicolas (2006). Playing the Market: A Political Strategy for Uniting Europe, 1985–2005.
The Choice for Europe Manuela (forthcoming). 'Getting Hedge Funds Regulation into the EU Agenda: The Constraints of Agenda DynamicsThe European Presence in Global Financial Governance: A Principal– Agent Perspective
  • A Moravcsik
Moravcsik, A. (1998). The Choice for Europe. London: UCL Press. Moschella, Manuela (forthcoming). 'Getting Hedge Funds Regulation into the EU Agenda: The Constraints of Agenda Dynamics', Journal of European Integration. Mu¨, Daniel (2011a). 'The European Presence in Global Financial Governance: A Principal– Agent Perspective', Journal of European Public Policy, 18:3, 383–402.
Social Democrat) had pressed for tighter controls on hedge funds at the G7 Summit in Britain, where it was blocked – as Schro¨ himself revealed in 'Wall Street and London' (The Independent
  • Previously
Previously, in July 2005, the then-Chancellor of Germany, Gerhard Schro¨ (Social Democrat) had pressed for tighter controls on hedge funds at the G7 Summit in Britain, where it was blocked – as Schro¨ himself revealed in 'Wall Street and London' (The Independent, 16 June 2005).