The Political Economy of Financial Market Regulation
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The Political Economy of Financial Market Regulation

The Dynamics of Inclusion and Exclusion

Edited by Peter Mooslechner, Helene Schuberth and Beat Weber

This book focuses on recent financial market reforms, and their implications for social, economic and political exclusion. In particular it considers the hitherto under-researched question of whose interests govern the design of regulatory mechanisms and who influences the decision-making process. This process is set out as contested terrain, in which there are winners and losers, and in which there are inevitably circles of exclusion. The authors, comprising financial authority experts and academic specialists, expand the concept of exclusion beyond its typical social dimension to incorporate all actors, be they individuals or institutions not permitted to contribute to financial market regulation as a public good. As they point out, this may take the form of political, economic or indeed cultural exclusion. The book examines the conflicts that arise between various interests and how these are managed within the process of regulation.
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Chapter 5: The Construction of the Single Market in Financial Services and the Politics of Inclusion and Exclusion

Beat Weber

Extract

5. The Construction of the Single Market in Financial Services and the Politics of Inclusion and Exclusion Beat Weber* 1. INTRODUCTION Efforts to build a single financial market in the EU gained momentum around the turn of the millennium. In 1997, the Council approved the Risk Capital Action Plan. In 1999, the European Council took an even broader step with the Financial Services Action Plan (FSAP). In 2001 it approved the report of a Wise Men’s Committee under Chairman Alexandre Lamfalussy calling for a streamlined procedure for legislation in the securities area. One year later, this ‘Lamfalussy Procedure’ was envisaged to be extended to the areas of banking and insurance. When one considers that financial markets are widely held to be the embodiment of globality, fluidity and borderlessness, it might seem surprising at first sight that so much political effort is considered necessary to bring about integration. Why did market forces not bring about the single market by themselves? Apart from other integration barriers like language and broader policy regimes, financial markets rest on complicated governance arrangements which are still predominantly national and therefore do not encourage transnational transactions in most market segments. While some parts of the markets are heavily internationalized, many areas of the financial sector are geographically segmented (Verdier 2002). In important aspects such as the organization of supervision, there is no universally accepted model or ideal type of financial governance arrangement, so convergence pressure from market forces is not very strong. If the single market is...

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