Veronica Hagenfeldt

European financial regulation and supervision and the onslaught of the financial crisis Veronica Hagenfeldt

Scholarly Essay from the year 2009 in the subject Law - European and International Law, Intellectual Properties, grade: Distinction, University of Edinburgh (School of Law), course: Regulatory governance in the European Union, language: English, comment: How has the financial regulatory and supervisory architecture evolved in Europe, and how did its shortcomings affect the onslaught of the current financial crisis? Are the proposed regulatory and supervisory reforms likely to successfully repair these weaknesses? , abstract: The aim of this paper is threefold: first to establish how the regulatory and supervisory architecture has evolved in Europe over the last decade; second to determine how the shortcomings of the present system affected the onslaught of the financial crisis in Europe; and lastly to evaluate whether the proposed regulatory and supervisory reforms are likely to successfully repair these weaknesses. Part I identifies that the single market objective, combined with the significant integration of European financial services, provided the major impetus for bringing about reform to the regulatory and supervisory architecture of Europe. By investigating the Financial Services Action Plan (FSAP) and the implementation of the Lamfalussy Process, this paper illustrates that the member states and the EU institutions sought to achieve a flexible regulatory and supervisory structure marked by cooperation and conversion towards common standards. However, despite the commendable progress made, Part II shows that the regulatory and supervisory system has not kept pace with the financial integration, and that the current crisis revealed substantial inadequacies of the present system. This paper will demonstrate that the weaknesses in the European financial regulatory and supervisory architecture acted both as contributing causes of the crisis, and as exacerbating factors. In particular the essay identifies three such shortcomings that aggravated the crisis, namel