I. Introduction Flashcards
1
Q
What is financial law?
A
- The law regulation the financial markets.
2
Q
What is the function of the financial markets?
A
- Money / credit supply
- Channeling the money to where it is needed:
- Financial markets as channels through which private savings find their way to industrial and commercial investments.
- Intermediation between excess of money and demand of money.
- Collection of savings, which are invested in credit or other financial transactions
- Also intermediation by volume: collection of relatively small amounts (“retail”) and supplies them in relativelly large amounts.
3
Q
What is the sectoral approach? What are the advantages?
A
- Approach on the basis of traditional financial sectors.
- Banking law: invluding law on deposit, payment and credit services
- Securities law
- Advantages:
- European legislation has a grosso modo sectoral approach
- Large domain is cut into smaller pieces which can be studied separately
- Clarity
4
Q
What are the disadvantages of the sectoral approach?
A
- Sectoral approach does not reflect reality
- “Blurring of sectors”:
- Product level: complex products: eg. PRIPS
- Level of financial intermediary: providing several services
- = Allfianz strategies, bancassurance, assurfinance, bancassurfinance
- Different legislation for economically similar financial products or intermediairies: bv. beleggingsverzekeringsproducten
- Risk of regulatory gaps and inconsistencies
- Risk of regulatory arbitrage
5
Q
What is the cross sectoral approach? What are the advantages and disadvantages?
A
- Approach on the basis of the key-elements in each financial sector.
- Advantages:
- Insight in parallels, overlaps, gaps, contradictions and unsubstantiated differences:
- Different rules for financial instruments which are formally part of different sectors, but which serve similar aims and have similar features.
- Insight in parallels, overlaps, gaps, contradictions and unsubstantiated differences:
- Disadvantages:
- Not all elements are as imporant in each financial sector: eg. venues
- The difference between different elements is not always clear:
- Investment funds
- Consumer credit
6
Q
What are the three layers of financial law?
A
- International law:
- Basel Committee on Banking Supervision
- IOSCO: International Organization of Securities Commissions
- FATS: Financial Action Task Force
- European law:
- TFEU: four freedoms, especially services and capital: ECJ case law
- EU directives and regulations
- Recommendations
- Guidelines, interpretations, Q&A’s,…
- Codes of conduct, usages and best practises of professional organisations
- National law
7
Q
What are the goals of financial law?
A
- Goals of financial law in general:
- Market stability and integritiy
- Protection of retail customers
- Additional “European” goal of financial law:
- Market integration
8
Q
What is the market integrity and stability?
A
- Macro rules: public interest:
- Avoiding systemic risk
- Systemic risk is particular to financial sector
- In a globalised financial world, avoiding/managing systemic risk requires regulation on a supra-national level:
- Cfr. crisis
9
Q
What is the goal of financial law with regards to protection of retail customers?
A
- Protection / confidence of retail customers
- Micro rules - Private interest
- Not particular to financial sector
- Need for regulation increases with the complexity of goods and services
- Consumer protection and market stability as 2 sides of a coing:
- Public interest and private interest are hardly separable: eg. responsible lending, “run on the bank”.
10
Q
What is the additional European goal of financial law?
A
- Integration: harmonisation:
- By law: directives and regulations
- By the market: eg. SEPA
- Easier access to European market by:
- Financial institutions
- Professional clients
- Retail clients
- Easier access to European market by:
- Not particular to European financial law
- Particularly important for European financial law
- Smooth functioning of financial markets as motor for economic growth.
11
Q
What are the 4 freedoms?
A
- Currently art. 28 TFEU.
- Art. 8 EEC Treaty: common market was to be estabilished by 31 december 1969 –> restrictions on free movement of goods, persons, services, services and capital should have been abolished
- Free movement of services and freedom of estabilishment:
- ECJ recognised direct effect quite early: Reyners (2/74)
- Free movement of capital and payments:
- This is to a large extent the flip side of the other freedoms.
- For a long time, no direct effect: Casati
- Directive and Treaty of Maastricht: direct effect - Sanz de Lera-case
- Negative integration:
- No impediments to free movemeent of financial services / capital and payments
12
Q
What was the White Paper?
A
- 1985: Completing the Internal Market:
- Aim: removal of all barriers to trade in the EC
- Liberalisation of the movement of capital and payments
- Realisation of an internal market for financial services on the basis of:
- Minimum harmonisation
- Home state control
- Mutual recoggnition
- First generation directives on banking and investment services
13
Q
What are the drawbacks of the white paper?
A
- Invenctives for supervisory shopping
- Risk of regulatory competition resulting in a race to the bottom
- Lack of trust in other MS legislation / supervision: much goldplating
- Drawbacks of the legislative process:
- Slow
- Unable to respond to changing market condtions
- Inclined to produce ambiguous texts, mixing broad principles with detailed technical issuesAttach Sounds
14
Q
What is the FSAP?
A
- 1999: Financial Services Action Plan:
- With the introduction of the Euro: modern financial apparatus
- New regulatory challenges
- Five imperatives for action
- Lisbon European Council of 24 march 2000:
- To accelerate completion of the internal market for fincnaisl services.
15
Q
What was the Lamfalussy report?
A
- 2002: Lamfalussy report and legislative procedure with respect to securities regulation
- Aim: speeding up the legislative process
- Four level approach
- Often max. harmonisation
- Extended to other sectors of financial law (banking, insurance) in 2003
- Second generation directives on banking and investment services
16
Q
What is the EMU?
A
- Economic and Monetary Union: 3 stages
- 1 july 1990 - 31 december 1993: realisation of free movement of capital and payments: Maastricht Treaty - Sanz de Lera Case
- 1 Jan 1994 - 31 dcember 1998: ECB, Stability and Growth Pact
- 1 Jan 1999:
- Introduction of the EURO: although notes and coins onlly since January 2002
- Single monetary policy under the authority of the ECB
17
Q
What is the SEPA?
A
- January 2008: launch of SEPA plan = Single European Payments Area
- Project of the European Payments Council: EPC
- Aims at standardising and thus facilitating electronic payments withing the SEPA:
- Improving the efficiency and costs of cross -border cashless payments
- Strongly supported by the European Commission:
- Payment Services Directive: PSD
- SEPA credit transfer: European format
- European Debit and Credit cards
18
Q
What was the effect of the crisis on the financial law?
A
- After the first wave of the crisis:
- De Larosière report: report of the high level group on financial supervision in the EU
- Reform of EU financial supervisory structure
- Ad hoc changes to financial regulation: changes to banking directives, update deposit guarantee directive
- Acceleration of work in progress: update consumer credit directive
- New regulation: AIFMD, new consumer credit directive
- Second wave of the crisis: problems with EMU in the light of the public debt crisis
19
Q
What are the aims of the Lamfalussy procedure?
A
- Speeding up the legislative process
- Be flexible so that legislation can be quickly adapted to the rapid pace of the technical changes and product innovation in the financial market
- Help speedy implementation
- Establishing a level playing field and removing any opportunity to erect regulatory barriers to competition
- 4 level approach
20
Q
What is the level 1?
A
- Framework principles:
- Basic political choices that can be translated into broad but sufficiently precise framework norms
- To be decided by normal legislative procedure
- Usually resulting in a framework directive = level 1 directive
21
Q
What is the level 2?
A
- Implementing measures:
- More detailed technical measures
- Mandate to the European Commission
- Usually resulting in an implementing directive or regulation = level 2 directive or regulation
22
Q
What is the level 3?
A
- Common implementing standards by the newly established level 3 committees: replaced in 2011 by the European Supeervisory Authorities
- Resulting in soft law with high authroitiative value = level 3 measures, interpretations, recommendations, Q&A’s.
23
Q
What was the level 4?
A
- Compliance check by the Commission, “underpinned by enhanced cooperation between MS, national regulators and the private sector
- Resulting in enforcement measures
24
Q
What is the importance of the Level3 committees?
A
- Securities regulation:
- Committee of European Securities Regulators: CESR
- 2011: replaced by the European Securities and markets Authority: ESMA
- With respect to banking:
- Committee of European Banking Supervisors: CEBS
- 2011: Replaced by the Eurpean Banking Authority: EBA.
- CEIOPS –> EIOPA.
25
Q
What is the supervision of EU financial law?
A
- Supervision by national supervisors:
- Home country control, mutual recognition, European passport.
- Exception: prudential supervision of the banking sector: ECB
- Cooperation at European level:
- ESA’s: European Supervisory Authorities
- EBA = European Banking Authority
- ESMA = European Securities and Markets Authority
- EIOPA = European Insurance and Occupational Pensions Authority
- ESA’s: European Supervisory Authorities
- ESRB = European Systemic Risk Board
- Exchange of information on systemic risk
26
Q
A
27
Q
A
