European Financial Regulation : Levelling the Cross-Sectoral Playing Field

Mirroring the long-established structure of the financial industry, EU financial regulation as we know it today approaches banking, insurance and investment services separately and often divergently. In recent decades however, the clear separation between financial sectors has gradually evaporated, as business lines have converged across sectors and FinTech solutions have emerged which do not fit traditional sector boundaries. As the contours of the traditional tripartition in the financial industry have faded, the diverging regulatory and supervisory treatment of these sectors has become increasingly at odds with economic reality. This book brings together insights developed by distinguished researchers and industry professionals in a series of articles analysing the main areas of EU financial regulation from a cross-sectoral perspective. For each specific research theme – including prudential regulation, corporate governance and conduct of business rules – the similarities, as well as gaps, overlaps and unjustifiable differences between banking, securities and insurance regulation, are clearly presented and discussed. This innovative research approach is aimed at informing lawmakers and policymakers on potential improvements to EU financial regulation whilst also supporting legal and compliance professionals applying the current framework or looking to streamline compliance processes. Preface Table of Contents List of Contributors List of Abbreviations PART I: CONCEPTUAL FRAMEWORK 1. Regulating Finance in a Post-Sectoral World: Setting the Scene I. Problem Statement II. State of the Art III. Research Method IV. Research Hypothesis V. Overview of this Book 2. Functioning of the Financial Industry I. Introduction II. Financial System and Institutions - Functions and Risks III. Banks IV. Insurance Companies V. Investment Funds VI. Pension Funds VII. Investment Firms VIII. Shadow Banks (Non-Bank Financial Intermediation) IX. FinTech Companies X. Conclusion 3. Objectives of Financial Regulation and their implementation in the European Union I. Introduction II. The Integration of the EU Financial Market as an Overall Objective III. Equal Regulation and Competition IV. The Structure of the EU Financial Supervision V. EU Sectoral Financial Regulation and Supervision VI. Diversity and Coordination VII. The Effect of Regulation on the Integration of the EU Financial Markets VIII. Conclusion 4. FinTech Regulation from a Cross-Sectoral Perspective I. Introduction: FinTech and Regulation II. The FinTech World: Characteristics and Effects on the Financial Sector III. FinTech: Main Regulatory Issues IV. Regulatory Issues Deriving from Flaws of the Current Approach in Financial Regulation and Supervision in General V. Proposals and Conclusions: Need for a More Functional, Proportional and Cross-Sectoral Approach 5. A Cross-Sectoral Approach to Regulation and a Twin Peaks System of Supervision: The Netherlands I. Introduction II. The Dutch Approach on Financial Sector Regulation and Supervision III. The Act on Financial Supervision IV. Challenges to the Cross-Sectoral Approach of Legislation V. Revisions to the Cross-Sectoral Approach of the Fsa? VI. The Cross-Sectoral Approach of the Fsa and the Twin Peaks Model: Does it Work? VII. Conclusion PART II: STABILITY OF THE FINANCIAL SYSTEM 6. Regulating Systemic Risk: A Cross-Sectoral Approach I. Introduction II. Systemic Risk III. European Banking Union IV. Other Sectoral Reform in the Eu V. The European Supervisory Agencies (ESAs) VI. The European Systemic Risk Board (ESRB) VII. More is Needed in Europe to Address Systemic Risk VIII. Conclusion 7. A Cross-Sectoral Analysis of Micro-Prudential Regulation I. Introduction II. Roles and Functions of Banks, Investment Firms and Insurance Companies III. International Standard Setters IV. Micro-Prudential Regulation in Europe V. Three Pillar Approach VI. Specific Features of Banking and Insurance VII. Conclusion 8. Corporate Governance 8A. A Cross-Sectoral Analysis of Corporate Governance Provisions: About Forests and Trees I. Introduction II. Why Do We Need a Special Governance Regime for Financial Institutions? III. Scope of the Legislative Instruments IV. A Cross-Sectoral Comparison of Governance in Financial Institutions V. Making Sense of the Cross-Sectoral Corporate Governance Picture: A New Framework VI. Conclusion Annex 8B. A Cross-Sectoral Analysis of Remuneration Policy Provisions I. Introduction to the Legal Framework II. Regulatory Aims III. Scope IV. Variable Remuneration V. Proportionality VI. Conclusion 8C. Ownership Allocation and Stakeholder Representation in Financial Institutions I. Introduction II. Ownership and Control of Financial Institutions: Theoretical Framework III. Ownership and Control of Financial Institutions: Model Analysis IV. Stakeholder Representation V. Conclusion 9. Resolution Regimes in the Financial Sector: In Need of Cross-Sectoral Regulation? I. Taking Stock: Where Do We Stand? II. Where to Go from Here? The Case for (and against) Cross-Sectoral Regulation Revisited III. Conclusions 10. Is there a Case for One Cross-Sectoral Compensation Scheme? I. Introduction II. Functions, Hierarchy of Goals and Scope of Deposit Guarantee Schemes (DGS) III. Functions, Hierarchy of Goals and Scope of Investor Compensation Schemes (ICS) IV. Functions, Hierarchy of Goals and Scope of Insurance Guarantee Schemes (IGS) V. Conclusion 11. The Cross-Sectoral Playing Field in Outsourcing I. Introduction II. Sources of Outsourcing Regulations III. The 2000 IOSCO Report IV. Evolution of Outsourcing Regulations V. General Principles VI. Topics Covered in Outsourcing Regulations VII. Some Topics with Sectoral Divergences VIII. Considerations and Conclusions PART III: CONSUMER PROTECTION 12. Scope of Protection: Is there a Ground for a Single Criterion? I. Introduction II. General Consumer Protection III. Protection of the Customer of Financial Services IV. An Issue at Stake: The "Pannon" Jurisprudence V. Conclusions 13. Product Information for Banking, Investment and Insurance Products I. Introduction II. Scope of the PRIIPs Regulation III. Other Standardised Information Documents in Financial Regulation IV. Need for Cross-Sectoral Consistency V. Conclusion 14. Service Quality (Conduct of Business) Rules 14A. Is there a Case for a Cross-Sectoral Duty of Care for the Financial Sector? I. Introduction II. Duties of Care in EU Financial Legislation III. Need for Financial Regulation Duty or Duties of Care on Top of Civil/Common Law Duties of Care? IV. General Duty of Care in the Unfair Commercial Practices Directive V. Conclusion 14B. An ‘Assist-Your-Customer Obligation’ for the Financial Sector? I. Introduction II. ‘Mifid-Like’ Know-Your-Customer Requirements for Investment Products in the Broad Sense III. Demands & Needs Analysis IV. Duty of Assistance & Responsible Lending Requirements V. Conclusions 15. Conflicts of Interest and Inducements in the Financial Sector I. Introduction II. The EU's Layered Approach to Regulating Inducements in the Financial Industry III. Sectoral Divergences in Inducements Regulation IV. Conclusion 16. Product Intervention: A Cross-Sectoral Analysis I. Introduction II. Unsubstantiated Differences between the MiFIR and PRIIPs Product Intervention Provisions III. Fundamental Issues Resulting from Regulating Product Intervention in Two Different Sets of Rules IV. Structure of Financial Supervision V. Conclusion PART IV: SUPERVISION AND INTERNAL MARKET 17. A Holistic Approach to the Institutional Architecture of Financial Supervision and Regulation in the EU I. Introduction II. The EU Architecture and the Case for Reform III. The Current Political Climate IV. Possible Alternatives for Improvement V. Conclusion 18. What Happens when an EU Financial Institution Crosses Borders? Time for Consistency? I. Introduction II. When is a Financial Institution Active in the Host State? III. Which Rules are Subject to Home State Supervision and Which to Host State Supervision IV. Concluding Thoughts and Suggestions PART V: SUMMARY AND CONCLUSIONS 19. Summary and Conclusions I. Conceptual Framework for a Cross-Sectoral Approach to Financial Regulation II. A Cross-Sectoral Perspective on Financial Stability III. A Cross-Sectoral Perspective on Customer Protection IV. Supervision and Internal Market V. Assessment of the Research Hypothesis and Outlook Index "Mirroring the long-established structure of the financial industry, EU financial regulation as we know it today approaches banking, insurance and investment services separately and often divergently. In recent decades however, the clear separation between financial sectors has gradually evaporated, as business lines have converged across sectors and FinTech solutions have emerged which do not fit traditional sector boundaries. As the contours of the traditional tripartition in the financial industry have faded, the diverging regulatory and supervisory treatment of these sectors has become increasingly at odds with economic reality. This book brings together insights developed by distinguished researchers and industry professionals in a series of articles analysing the main areas of EU financial regulation from a cross-sectoral perspective. For each specific research theme - including prudendial regulation, corporate governance and conduct of business rules - the similarities, as well as gaps, overlaps and unjustifiable differences between banking, securities and insurance regulation, are clearly presented and discussed. This innovative research approach is aimed at informing law and policymakers on potential improvements to EU financial regulation whilst also supporting legal and compliance professionals applying the current framework or looking to streamline compliance processes."-- Page 4 de la couverture "Mirroring the long-established structure of the financial industry, EU financial regulation as we know it today approaches banking, insurance and investment services separately and often divergently. In recent decades however, the clear separation between financial sectors has gradually evaporated, as business lines have converged across sectors and FinTech solutions have emerged which do not fit traditional sector boundaries. As the contours of the traditional tripartition in the financial industry have faded, the diverging regulatory and supervisory treatment of these sectors has become increasingly at odds with economic reality. This book brings together insights developed by distinguished researchers and industry professionals in a series of articles analysing the main areas of EU financial regulation from a cross-sectoral perspective. For each specific research theme - including prudendial regulation, corporate governance and conduct of business rules - the similarities, as well as gaps, overlaps and unjustifiable differences between banking, securities and insurance regulation, are clearly presented and discussed. This innovative research approach is aimed at informing law and policymakers on potential improvements to EU financial regulation whilst also supporting legal and compliance professionals applying the current framework or looking to streamline compliance processes"-- Provided by publisher