Skip to main content
SpringerLink
Log in

The Structure of Financial Supervision in Europe: About Single Financial Supervisors, Twin Peaks and Multiple Financial Supervisors

  • Articles
  • Published:
European Business Organization Law Review Aims and scope Submit manuscript

Abstract

In Europe, several models for financial supervision have developed over time: from the traditional three-pillar or institutional model (banking insurance and securities), via the intermediate ‘twin peaks’ model, which is closer to a functional approach, to the single or integrated model. Many elements, including market structure, historical and political factors, have determined each State’s choice in favour of one of the models. Several States have recently tried to find more efficient and less costly supervisory schemes. A comparative analysis of the features of these models gives indications about the drivers for choosing one of them and the pros and cons that have been advanced. The actual situation in each of the EU States is described. Some conclusions are drawn as to the regulatory structure at EU level.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  1. T. Padoa-Schioppa, ‘EU structures for financial regulation, supervision and stability’, Brussels, 10 July 2002, available at: http://www.ecb.int/press/key/date/2002/html/sp020710.en.html; T. Padoa-Schioppa, ‘Financial Supervision: Inside or Outside Central Banks’, in J.J.M. Kremers, D. Schoenmaker and P.J. Wierts, eds., Financial Supervision in Europe (Cheltenham, Elgar 2003) p. 160; C. Goodhart, ‘The Organisational Structure of Banking Supervision’, Financial Stability Institute (BIS) (November 2000), also appears in Banca Monte Paschi di Siena, Economic Notes, Vol. 31 (Siena 2002) pp. 1–32; C. Goodhart, ‘Financial Supervision from an Historical Perspective: Was the Development of Such Supervision Designed or Largely Accidental?’, in National Bank of Finland, The Structure of Financial Regulation, available at: http://www.bof.fi/eng/7tutkimus/GoodhartPresentation.pdf; A. Sainz de Vicuna, ‘The ESCB and its role in banking supervision’, in R.M. Lastra, ed., The Reform of the International Financial Architecture (The Hague, Kluwer Law International 2001) pp. 313–323. More in general, see Kremers, Schoenmaker and Wierts, op. cit. n. 1; J. Kremers, D. Schoenmaker and P. Wierts, ‘Cross-Sector Supervision: Which Model?’, in R. Herring and R. Litan, eds., Brookings-Wharton Papers on Financial Services: 2003 (Washington DC, Brookings Institution Press 2003), pleading for a European system of financial supervisors in tandem with a centralised body; D. Schoenmaker and S. Oosterloo, ‘Cross-Border Issues in European Financial Supervision’, Brookings-Wharton Papers on Financial Supervision (2003) p. 226; M. Andenas, ‘Who Is Going to Supervise Europe’s Financial Markets?’, in M.T. Andenas and Y.V. Avgerinos, eds., Financial Markets in Europe: Towards a Single Regulator? (London/The Hague, Kluwer Law International 2003) pointing to the ECB; A. Freytag and D. Masciandaro, ‘Financial Supervision Unification and Central Bank Independence: Is There Any Trade Off.?’, available at: http://www.pubchoicesoc.org/papers2005/Freytag_Masciandaro.pdf; A. Freytag and D. Masciandaro, ‘Financial Supervision Fragmentation and Central Bank Independence: The Two Sides of the Same Coin’, University of Lecce Economics Working Paper No. 76/37 (October 2005), available at: http://ssrn.com/abstract=837124; D. Masciandaro, ed., Handbook of Central Banking and Financial Authorities in Europe (Cheltenham, Elgar 2005).

  2. For the most recent official position, see the FSC’s Report on Financial Supervision — the so-called Franque Report — of 2 February 2006. For previous reports, see the CESR’s so-called Himalaya Report, ‘Which Supervisory Tools for the EU Securities Markets?’, Doc. 04-333f, 25 October 2004, available at: http://www.cesr-eu.org/index.php and the so-called Lamfalussy Report, ‘Final Report of the Committee of Wise Men on the Regulation of European Securities Markets’ available at: http://ec.europa.eu/internal_market/securities/docs/lamfalussy/wisemen/final-report-wise-men_en.pdf. On this subject, opinions differ from strong support for a European regulator to outright opposition, as well as many intermediate positions. Those in favour of centralisation include: M. Andenas, ‘Who is Going to Supervise Europe’s Financial Markets’, E. Pan, ‘The Case for a Single European Securities Regulator’, Y. Avgerinos, ‘The Need and Rationale for a European Securities Regulator’ and G. Thieffry, ‘After the Lamfalussy Report: The First Steps towards a European Securities Commission’, all four in Andenas and Avgerinos, op. cit. n. 1; Y. Avgerinos, ‘EU Financial Market Supervision Revisited: The European Securities Regulator’, Jean Monnet Working Paper No. 7/03 (2003), available at: http://www.jeanmonnetprogram.org/papers/03/030701.html; I. van den Burg, ‘Centraal Europees toezicht is efficiënter dan lead supervision’, NVB Bulletin (June 2005) pp. 6–8, available at: http://www.nvb.nl/scrivo/asset.php?id=11660; I. van den Burg, ‘Roep om een Europese toezichthouder op de financiële sector’, 27 July 2006, available at: http://www.Treasury.nl; P. Billot, ‘European Financial Markets: Do They Need a Single Regulator?’ (April 2005), available at: http://www1.jonesday.com/pubs/pubs_detail.aspx?pubID=S726; G. Hertig and R. Lee, ‘Four Predictions about the Future of EU Securities Regulation’, 3 Journal of Corporate Law Studies (2003) pp. 359–377, available at: http://www.effas.com/pdf/hertig_lee.pdf#search=%22hertig%20Lee%20Four%20predictions%22; Schoenmaker and Oosterloo, loc. cit. n. 1, also published in D.G. Mayes and G.E. Wood, eds., The Structure of Financial Regulation (London/New York, Routledge 2007), pleading for an ECB-like structure for prudential supervision. In ‘Central Banks and Financial Authorities in Europe: What Prospects?’, in Masciandaro, op. cit. n. 1, at p. 438, Schoenmaker allows some room for ‘policy competition’. Conversely, many writers are hesitant towards or even firmly opposed to a European institution. See X. Vivès, ‘Restructuring Financial Regulation in the European Monetary Union’, 19 Journal of Financial Services Research (2001) pp. 57–82, available at: http://ssrn.com/abstract=273734; E. Ferran, Building an EU Securities Market (Cambridge, Cambridge University Press 2005) especially ch. III; H. Davies, ‘The European Single Financial Market: Mirage or Miracle?’, available at: http://www.fsa.gov.uk/Pages/Library/Communication/Speeches/2002/sp94.shtml; K. Alexander, ‘Establishing a European Securities Regulator: Is the European Union an Optimal Economic Area for a Single Securities Regulator?’, Working Paper, available at: http://www.cerf.cam.ac.uk/publications/files/WP%2007%20-%20Kern%20Alexander%20v3.pdf; K. Lannoo, ‘Does Europe Need an SEC? Securities Market Regulation in the Financial Markets in Europe: Towards a Single Regulator?’, Paper prepared for the European Capital Markets Institute, November 1999. R. Lastra, ‘The Governance Structure for Financial Regulation and Supervision in Europe’, London Financial Regulation Seminar, donSchool of Economics, 19 May 2003, also appears in 10 Columbia Journal of European Law (2003) pp. 49–65. See further European Savings Banks Group, ‘The Future Organisation of Financial Regulation and Supervision in the European Union’, 25 August 2002. An open position is taken by N. Moloney, EC Securities Regulation (Oxford, Oxford University Press 2002) p. 897.

  3. C. Briault, ‘The Rationale for a Single National Financial Regulator’, FSA Occasional Paper No. 2 (1999), available at: http://www.fsa.gov.uk/pubs/occpapers/OP02.pdf#search=%22Briault%20rationale%20for%20a%20single%22; C. Briault, ‘FSA Revisited, and Some Issues for European Securities Markets Regulation’, in Andenas and Avgerinos, op. cit. n. 1, at p. 323; M. Taylor and A. Fleming, ‘Integrated Financial Supervision: Lessons from the Northern European Experience’, World Bank Policy Research Paper (1999), available at: http://wbln0018.worldbank.org/html/FinancialSectorWeb.nsf/(attachmentweb)/wp002223/$FILE/wp002223.pdf#search=%22integrated%20financial%20supervision%20Northern%20European%20experience%22. M. Taylor and A. Fleming, ‘Integrated Financial Supervision: Lessons from the Scandinavian Experience’, Finance and Development (December 1999), available at: http://www.imf.org/external/pubs/ft/fandd/1999/12/taylor.htm. For an interesting comparative and empirical overview on a worldwide basis, see M. Čihák and R. Podpiera, ‘Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision’, IMF Working Paper No. 06/57 (2006), available at: http://www.imf.org/external/pubs/ft/wp/2006/wp0657.pdf#search=%22is%20one%20watchdog%20better%20than%20three%22. E. Ferran, ‘Examining the UK’s Experience in Adopting the Single Financial Regulator Model’, Brooklyn Journal of International Law (forthcoming), available at: http://ssrn.com/abstract=346120; G. di Giorgio and C. di Noia, ‘Financial Market Regulation and Supervision: How Many Peaks for the Euro Area’, 28 Brooklyn Journal of International Law (2003) p. 463. An expanded version of this article appears as G. di Giorgio, C. di Noia and L. Piatti, ‘Financial Market Regulation: The Case of Italy and a Proposal for the Euro Area’, in Andenas and Avgerinos, op. cit. n. 1, at pp. 397–420. F. Heinemann und M. Schüler, ‘Finanzmarktregulierung und -aufsicht in der Europäische Union’, Arbeitskreis Europäische Integration 2004/1-2, available at: http://www.aei-ecsa.de/tagung_eu-financialmarkets_bericht.pdf#search=%22sch%C3%Bcler%20zew%22. D. Llewellyn, ‘Institutional Structure of Financial Regulation and Supervision: The Basic Issues’, World Bank Seminar, 6–7 June 2006, available at: http://info.worldbank.org/etools/docs/library/232743/Llewellyn_OverviewPaper2006_final.doc; D. Llewellyn, ‘Integrated Agencies and the Role of Central Banks’, in Masciandaro, op. cit. n. 1, at p. 109; European League for Economic Cooperation (ELEC), ‘Financial Supervision in Europe: Time for a European System’ (2006), available at: http://www.epc.eu/en/er.asp?TYP=ER&LV=293&see=y&t=2&PG=ER/EN/detail&l=&AI=594.

  4. For a broad overview, see K. Lannoo, ‘EU Financial Regulation and Supervision Beyond 2005’, CEPS Report (2005), available at: http://ceps01.link.be/files/ProspectusBeyond2005.pdf#search=%22CEPS%2C%20EU%20financial%20regulation%22. See further K. Lannoo, ‘Challenges to the Structure of Financial Supervision in the EU’, CEPS Report (July 2000).

  5. However, in the wholesale markets, the integration is not European but worldwide. Hence, the integration and supervisory issues should be analysed on a worldwide basis.

  6. See the Commission’s periodically updated ‘Financial Integration Monitor’, available at: http://ec.europa.eu/internal_market/finances/fim/index_en.htm. For an analysis, see C. Gjersem, ‘Financial Market Integration in the Euro Area’, OECD Economics Department Working Paper No. 368 (October 2003); D. Schoenmaker and S. Oosterloo, ‘Financial Supervision in an Integrating Europe: Measuring Cross-Border Externalities’, 8(1) International Finance (2005) pp. 1–27.

    Article  Google Scholar 

  7. On the importance of this distinction for analysing the state of integration in European regulatory action, see E. Wymeersch, ‘The Future of Financial Regulation and Supervision in Europe’, 42 CMLR (2005) pp. 987–1010.

    Google Scholar 

  8. Llewellyn, loc. cit. n. 3, at p. 3. This author refers to ‘unified’ supervision if it includes conduct of business.

  9. See Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast), OJ 2006 L 177/1; Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast), OJ 2006 L 177/201.

  10. For the present state of preparation of this Directive, see: http://ec.europa.eu/internal_market/insurance/solvency2/index_en.htm and http://www.ceiops.org/content/view/5/5/.

  11. See Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision, OJ 2003 L 235/10-21.

  12. On the basis of a European Directive of 30 May 1994 on deposit-guarantee schemes, OJ 1994 L 135.

  13. Especially under the European Tax Savings Directive 2003/48/EC of 3 June 2003 on taxation of savings income in the form of interest payments, OJ 2003 L 157/38.

  14. Several States have called on their national — or even foreign — banking systems to organise or contribute to the repatriation or registration of funds from abroad within the context of tax ‘amnesty’ measures.

  15. In Belgium, the so-called Gutt operation of 6 October 1944 replaced all currency in circulation after the war. See H. Van der Wee and M. Verbreyt, Oorlog en monetaire politiek, de Nationale Bank van België, de Emissiebank te Brussel en de Belgische regering, 1939–1945 (Nationale Bank van België 2005) p. 657 et seq.

  16. The fall of Arthur Andersen is a well-documented case of the dangers of disrespect of ethical principles. See B.L. Toffler, Final Accounting: Ambition, Greed and the Fall of Arthur Andersen (New York, Broadway Books 2003).

    Google Scholar 

  17. Art. 6(2) of the Market Abuse Directive, according to which an issuer may delay publication if that publication would harm the legitimate interest of the company, if it would not be likely to mislead the public and if the issuer can guarantee the confidentiality.

  18. On the financial supervisor’s liability, see M. Tison, ‘Do Not Attack the Watchdog! Banking Supervisor’s Liability after Peter Paul’, CMLR (2005) p. 48. F. Rossi, ‘Tort Liability of Financial Regulators, A Comparative Study of Italian and English Law in a European context’, EBLR (2003) p. 643; C. Proctor, ‘Financial Regulators, Risks and Liabilities’, Butterworths Journal of International Banking and Financial Law (2002) p. 71; M.T. Andenas and D. Fairgrieve, ‘To Supervise or to Compensate?’, in M.T. Andenas and D. Fairgrieve, eds., Liber Amicorum in Honour of Lord Slynn of Hadley: Judicial Review in an International Perspective (The Hague, Kluwer Law International 2000).

  19. In some of the banking supervisory laws, one even finds that the prudential supervisor may not become involved in the relations between a bank and its individual client. See, e. g., Art. 46 of the Belgian Law of 2 August 2002. The provision goes back to the original Banking Act of 1935.

  20. For example, by ensuring disclosure, fair contracts terms, best practices relating to disclosure, advertisements, etc.

  21. CESR, ‘Protocol on Mediation Mechanism of the Committee of European Securities Regulators’ (August 2006). Cf. AMF, ‘La charte de la mediation’, available at: http://www.amf-france.org/documents/general/3822_1.pdf.

  22. On financial education and literacy, see OECD, ‘Recommendation on Principles for Good Practices for Financial Education and Awareness’ (July 2005), available at: http://www.oecd.org/dataoecd/7/17/35108560.pdf. The UK FSA has also developed an investor education programme, see: http://www.fsa.gov.uk/financial_capability/. A guide to the provision of financial services education for consumers can be found at: http://www.fsa.gov.uk/pubs/policy/P11.pdf.

  23. See the comparative surveys of the financial conditions drawn up by the Irish supervisor for a broad range of financial services, including current accounts, home insurance, credit card costs, etc., available at: http://www.ifsra.ie/frame_main.asp?pg=%2Fconsumer%2Fcr%5Fintr%2Easp&nv=%2Fconsumer%2Fcr%5Fnav%2Easp. The Dutch AFM publishes best offers for similar services identifying the banks that offer the best buy. A chat box is available to visitors of the site to exchange experiences on said products, at: http://www.geldwaardering.nl/geldwaardering/. Compare with the UK FSA: http://www.fsa.gov.uk/consumer/compare/index.html.

  24. Mostly in the form of a ‘fit and proper’ test for both shareholders and directors.

  25. See the discussion in Italy about the takeover of Banca Antonveneta by Dutch ABN-Amro, ultimately leading to proposals by the EU Commission to change Art. 16 of the Banking Directive. See C. McCreevy, ‘Improving the supervisory approval process for mergers and acquisitions’, Proposal for a Directive improving and clarifying the procedure and criteria for the prudential assessment of acquisitions and increase of shareholdings in the financial sector, Brussels, 12 September 2006, available at: http://europa.eu.int.

  26. In some States, supervision of the stock exchange transactions, listing conditions and even listing prospectuses was exercised by the stock exchange itself. This pattern is bound to disappear with the privatisation of the exchanges. However, exchanges could still act as delegated authority within the national context. See Art. 21(1) of the Prospectus Directive and Art. 24(1) of the Transparency Directive.

  27. See the BIS Core Principles for Effective Supervision: ‘each authority should have operational independence&’. New version according to the consultative document of April 2006, available at: http://www.bis.org/publ/bcbs123.pdf. See also IOSCO Principle A.2, stating that the ‘regulator should be operationally independent&’. IOSCO Objectives and Principles of Securities Regulation (February 2002), available at: http://www.iosco.org/library/pubdocs/pdf/IOSCOPD154.pdf#search=%22Objectives%20and%20principles%20of%20securities%20regulation%2C%20february%202002%22.

  28. For the list of passported services, see Annex 1 to the Banking Directive of 20 March 2000. The list only relates to mutual recognition and does not restrict banks from engaging in other business according to domestic law. Some would even consider that a bank may even run a travel agency as this activity might be considered linked to its money exchange activity.

  29. See Art. 51 of the CAD Directive of 20 March 2000, replaced by Art. 120 of the Directive relating to the taking up and pursuit of the business of credit institutions (recast), OJ 2006 L 177/1.

  30. See Art. 7(2) of the First Life Insurance Directive 79/267/EEC of 5 March 1979: States may restrict activity to one of the classes.

  31. See Art. 8(1)(b) of the First Life Insurance Directive, which in fact excludes any commercial activity other than insurance. Cf. Art. 8(1)(b) of the First Non-Life Insurance Directive 73/239/EEC of 24 July 1973.

  32. See Art. 21(1) of the First Non-Life Insurance Directive and ECJ, Case C-241/97 Försäkringsaktiebolaget Skandia [1999] ECR I-1879.

  33. Often through a holding company, or the bank owning the insurance company, or vice versa. See Art. 18(2) of the First Life Insurance Directive.

  34. Examples are the deposit taking activities in the United Kingdom, which were brought under the law in the 1978 Act on Deposit-Taking Institutions, applicable to the so-called ‘fringe banks’. See Goodhart, ‘Financial Supervision’, loc. cit. n. 1, at p. 22. A similar stop-gap law was enacted in Belgium in 1964, also dealing with deposit taking by firms other than supervised institutions (Law of 10 June 1964).

  35. This factor is generally regarded as the main trigger for the evolution towards the integrated supervisor model. See the statement by the United Kingdom upon the creation of the FSA, cited by Briault, ‘Rationale’, loc. cit. n. 3, at p. 9. The statement further pointed ‘to the complexity of financial regulation’, while the pre-existing system ‘& was not delivering a standard of supervision and investor protection that the public has the right to expect.’ See also A. Sykes and T. Allen, ‘The United Kingdom’, in Masciandaro, op. cit. n. 1, at p. 154.

  36. Thus, for example, ‘unit-linked’ insurance contracts do offer the same characteristics as an investment fund, or even a managed investment account, some ‘notes’ are financially identical to investment funds, credit defaults swaps are close to insurance, insurance contracts are similar to sight or short term deposits, etc.

  37. For example, in the case of insurance contracts, no ex ante vetting of the contract terms or the advertisements is allowed, according to Art. 8(3) of the First life Insurance Directive (see supra n. 30), while ex ante supervision can be exercised on advertisements for banking products, and, in general, financial disclosure is imposed for the public offering of securities. The MiFID (see infra n. 71) applies to banking services, not to substantially identical insurance services. On top of taxation differences, this leads to a clear unlevel playing field and ‘substitute products’ (see infra n. 58).

  38. And, more frequently, the supervision of pension funds, for example, in Cyprus, Finland, Greece and Spain. Often the supervision is exercised by a separate body, closely linked to the ministry.

  39. See K. Scott, ‘The Dual Banking System: A Model of Regulatory Competition’, 30 Stanford L.R. (1977) p. 12 et seq; but see also H. Butler and J. Macey, ‘The Myth of Competition in the Dual Banking System’, 73 Cornell L.R. (1988) p. 677.

    Google Scholar 

  40. This line of thought has been developed in the United States especially by R. Romano, ‘Empowering Investors: A Market Approach to Securities Regulation’, in K.J. Hopt, et al., Comparative Corporate Governance (Oxford, Clarendon Press 1998) p. 143. However, the thesis remains controversial.

    Google Scholar 

  41. Excluding authorities responsible for competition, consumer protection, money laundering and other subjects.

  42. This relates to stock exchange supervision, which is still a competence of the Länder. See § 1(1) of the German Stock Exchange Act.

  43. The reverse question, i. e., whether regulatory competition is useful, is sometimes answered in the negative. See C. Goodhart, ‘The Political Economy of Financial Harmonisation in Europe’, in Kremers, Schoenmaker and Wierts, op. cit. n. 1, at p. 132, according to which regulatory competition has worked against convergence towards a more efficient common system.

  44. For example, there is very strong competition in the asset management market segment, where Luxembourg and Ireland have conquered a leading role. The Luxembourg market share in terms of assets under management is larger than the French, with a population amounting to just 0.77 per cent of that of France.

  45. C. Goodhart, P. Hartmann, D. Llewellyn, L. Rojas-Suarez and S. Weisbrod, Financial Regulation: Why, How and Where Now? (London, Routledge 1998) pp. 159–168, proposes regulation on the basis of objectives, leading to a distinction between six objectives with six separate regulators. See, however, Goodhart, ‘Organisational Structure’, loc. cit. n. 1, at p. 10; Llewellyn, loc. cit. n. 3, at p. 5, mentions ten functions, but does not advocate as many regulators. Other schemes have been presented. For example, Gjersem, op. cit. n. 6, at para. 86, puts forward a scheme where banking and insurance would be pooled, but securities ‘left to the competition authorities and institutions for consumer protection’. The Australian scheme, as proposed by the Wallis Committee in 1997, suggested four lines of supervision with as many supervisory bodies.

    Google Scholar 

  46. M. Taylor, Twin Peaks: A Regulatory Structure for the New Century (London, Centre for the Study of Financial Innovation 1995). The ‘peaks’ refer to the objectives of financial stability v. consumer protection, in fact corresponding to the wholesale v. retail activity. In fact, Taylor proposed a ‘three peaks’ scheme: apart from the two above-mentioned objectives, there would also be a ‘market surveillance agency’ (p. 14). A ‘four peaks’ model was proposed by di Giorgio, di Noia and Piatti, loc. cit. n. 3, at pp. 397–420.

    Google Scholar 

  47. Australian Prudential Regulation Authority (APRA), see: http://www.apra.gov.au/aboutAPRA/.

  48. Australian Securities and Investments Commission (ASIC), see: http://www.asic.gov.au/asic/asic.nsf.

  49. De Nederlandse Bank not only supervises banks, insurance companies and pension funds but also securities firms, investment funds, trust offices and money exchange and money transfer firms. In each case, the supervision is essentially prudential or aims at insuring the integrity of the financial business. See: http://www.dnb.nl/dnb/pagina.jsp?pid=tcm:12-40542-64.

  50. The Autoriteit Financiële Markten (AFM) is in charge of supervising market conduct by financial firms. This includes the functioning of the different market segments, their operations and their intermediaries. See: http://www.afm.nl/marktpartijen/default.ashx?FolderId=1052.

  51. It was also favoured by the ECB, see ECB, ‘The Role of the Central Banks in Prudential Supervision’ (March 2001); see also Padoa-Schioppa, ‘Financial Supervision’, loc. cit. n. 1, at p. 164.

  52. E. Tafara, ‘Remarks before the World Economic Forum Industry agenda meeting regarding finance, 21 September 2004, available at: http://www.sec.gov/news/speech/spch092104et.htm, giving an historical overview and arguments in favour of a functional scheme. The French system was also considered a ‘twin peaks’ model. See D. Fairgrieve, ‘Twin Peaks à la Française: Reforming Financial Services Regulation in France’, in Andenas and Avgerinos, op. cit. n. 1, at pp. 381–395.

  53. The term ‘conglomerate’ is rather unfortunate as it may also refer to the mixed industry and finance groups that characterised the 1970s, most if not all of which disappeared in rather difficult circumstances. Today, the term refers to financial services groups offering several types of services, usually without any other activity in the group than financial business. For a long list of conglomerates under the European definition, see: http://ec.europa.eu/internal_market/financial-conglomerates/docs/20060424_conglomerates_bycountry_en.pdf.

  54. See, e. g., the different disclosures or conduct of business requirements relating to the offering to consumers of banking v. insurance products.

  55. Financial Conglomerates Directive 2002/87/EC of 16 December 2002. On supervisory issues, see U.H. Schneider, in G. Ferrarini, ed., Prudential Regulation of Banks and Securities Firms (London/The Hague, Kluwer Law International 1995) p. 77 et seq.

  56. See Art. 5(1) of the Conglomerates Directive explaining the relationship between the sectoral and supplementary supervision introduced by the Directive.

  57. See NBB, ‘Financial Stability Review 2002’, at p. 72 et seq., available at: http://www.bnb.be/Sg/En/Produits/publication/4430e.htm.

  58. The subject has been flagged in several official reports, e. g., on so-called ‘substitute products’. See CEBS 3L3 Programme for 2006, available at: http://www.c-ebs.org/3L3wp2006.pdf, and the reports on the meetings of the CESR’s Market Participants Consultative Panel, at: http://www.cesr-eu.org/index.php?page=groups&mac=0&id=24. Regarding France, see J. Delmas-Marsalet, ‘Rapport relatif à la commercialisation des produits financiers’ (November 2005), calling attention to several cases of unlevel playing fields.

  59. Council Regulation (EC) No. 2157/2001 of 8 October 2001.

  60. Directive 2005/56/EC of the European Parliament and of the Council of 26 October 2005 on cross-border mergers of limited liability companies, available at: http://europa.eu.int/eur-lex/lex/LexUriServ/site/en/oj/2005/l_310/l_31020051125en00010009.pdf.

  61. No directive has yet been proposed by the Commission on this topic, but it seems likely that one will be forthcoming.

  62. For example, the MOU between the Treasury, the Bank of England and the FSA, speech by Eddie George, 21 June 2000, available at: http://www.bankofengland.co.uk/publications/speeches/2000/speech89.htm.

  63. See Wymeersch, loc. cit. n. 7.

  64. See the Dutch Raad voor Financiële Toezichthouders, a cooperation structure grouping together the DNB and the AFM. It is unclear whether this council is still in existence. A similar technique is found in several other jurisdictions. See, e. g., France (see section 6.1.1) or Belgium, (section 6.2.5). In Germany, a Forum für Marktaufsicht, in which Bundesbank and BAFin participate, was created by MOU and incorporated into law.

  65. On the history of the creation of the FSA, see Goodhart, ‘Financial Supervision’, loc. cit. n. 1, at p. 30 et seq.; and Ferran, loc. cit. n. 3.

  66. This was the approach in Germany and Belgium. In both cases, the merger was first decided and later implemented. In the United Kingdom, and more clearly in the Netherlands, the merger was preceded by a long preparatory period.

  67. Thus, for example, the prudential rules applicable to banks and insurance companies are likely to become more comparable after the Basel II and Solvency II Directives have come into force. Some writers believe that integration will remain elusive. See Gjersem, op. cit. n. 6, at para. 88, referring to M.J. de Luna and T. Rose, ‘International Survey of Integrated Financial Sector Supervision’, World Bank Policy Review Paper No. 3096 (2003), available at: http://econ.worldbank.org/files/28404wps3096.pdf.

  68. Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 3.9, make the comparison between the two forms of supervision alike to that between a doctor and a policeman.

  69. Ibid., at section 4.1.

  70. See, inter alia, Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 1.9.

  71. See Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (Markets in Financial Instruments Directive — MiFID).

  72. See Lannoo, ‘EU Financial Regulation’, loc. cit. n. 4, at p. 12, about the 2002 EU decisions on structuring financial regulation, especially in the field of banking.

  73. See section 1 and the accompanying references in n. 1.

  74. Especially the separation between banking and insurance, but also between life and nonlife. See section 4.6.

  75. Some say that sectoral regulation creates risks of regulatory arbitrage. If the supervisory structure follows the sectoral scheme, which is the case in the institutional model, sectoral regulators will fear to loose market share and hence take a more competitive stand vis-à-vis other regulators. The phenomenon is well known in a cross-border context.

  76. Llewellyn, loc. cit. n. 3, at p. 20.

  77. Additional costs, inconsistencies in regulation and inefficiencies in supervision are likely to arise. This applies even more today, as firms often have to apply for a series of specific business licences, for example, for consumer credit, mortgage credit, electronic payments, money transfer services and so on. Part of this slicing is due to the directives that do not contain a comprehensive list of financial services. In addition, under the Insurance Directives, additional licences are needed, in some States even for several of the classes, listed in the annexes to the 1973 and 1979 Directives.

  78. Tafara, loc. cit. n. 52, refutes the argument as multiple supervisors — as is the case in the United States — regularly have overlapping competences. Padoa-Schioppa, ‘Financial Supervision’, loc. cit. n. 1, at p. 163, warns of unregulated zones.

  79. Several documents refer to the delegation of supervisory powers, see, e. g., the Franque Report, loc. cit. n. 2. For an analysis, see E. Wymeersch, ‘Delegation as an Instrument for Financial Supervision’, Financial Law Institute Working Paper No. 2007-04 (2006).

  80. All authors concur on this factor: Briault, ‘Rationale’, loc. cit. n. 3, at p. 13; Goodhart, et al., op. cit. n. 45, p. 147; Taylor, op. cit. n. 46, at p. 4.

  81. Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 1.9.

  82. According to Ferran, loc. cit. n. 3, at p. 15, n. 85, the integrated scheme allows all risks to be evaluated and gauged against the statutory objectives.

  83. Schoenmaker and Oosterloo, loc. cit. n. 6, at p. 10.

  84. See Schoenmaker and Oosterloo, loc. cit. n. 1, at p. 9, analysing some of these developments and their supervisory consequences.

  85. See also Ferran, loc. cit. n. 3, at p. 14 et seq.

  86. Reference should be made to Pillar III, Art. 145 of Directive 2006/48/EC of 14 June 2006, OJ L 177/1.

  87. The point is touched upon by Ferran, loc. cit. n. 3, at pp. 15 and 24. One could mention a whole range of issues — such as accounting rules, compliance or money laundering — where differences in regulation would result in distortions in the group’s action and hence in supervision.

  88. As well as in pension funds.

  89. At least provisionally, different solutions will have to be found for applying the own fund requirements. These are the prudential filters, discussed in the Basel Committee Press Releases of 14 June 2006 (‘on the use of the fair value option for financial instruments by banks’) and 20 July 2006 (‘capital treatment of certain items under IFRS’). See also CEBS, ‘Guidelines on Prudential Filters for Regulatory Capital’, 21 December 2004. They differ between banking and insurance.

  90. Briault, ‘FSA Revisited’, loc. cit. n. 3, at p. 327, mentions such issues as Y2K and the risks and opportunities arising from e-commerce. The FSA has published A Single Handbook of Rules and Guidance.

  91. In that sense, see Briault, ‘Rationale’, loc. cit. n. 3, at p. 25.

  92. These rules have been developed in the securities field and will be extended to the banking field as part of the MiFID regime. One can expect them to be extended to the insurance business as well.

  93. See Directive 2002/92/EC of 9 December 2002, which only contains rules on the intermediaries’ conflict of interest position.

  94. For example, the ‘know your customer rule’, or ‘suitability rule’, as well as the rules on advertisements and financial disclosure in general (but not insurance).

  95. Art. 1 of MiFID (see supra n. 71).

  96. For example, on the fit and proper character of managers of financial institutions. Managers who meet the requirements for one sector should, if possible, not have to be screened for taking up activity in other sectors, especially if the companies belong to the same group.

  97. Rendering companies more sensitive to their previously undisclosed pension liabilities.

  98. For example, to be applied both for disclosure to the market and for prudential purposes, even if prudential ‘corrections’ have to be adopted on specific items. See supra n. 89 about ‘prudential filters’.

  99. In Belgium, the regulation relating to auditors applies to banking and insurance firms as well as to pension funds. See CBFA Regulation of 21 February 2006, approved by Ministerial Decree of 19 April 2006.

  100. See Third Money Laundering Directive 2005/60/EC of 26 October 2005, OJ 2005 L 309/45.

  101. See the statement by the Czech National Bank, ‘President Signs Act on Integration of Financial Market Supervision’, 22 February 2006, available at: http://www.cnb.cz/www.cnb.cz/en/media_service/press_releases_cnb/2006/060222_integration_act_signed.html. In the same sense, Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 2.45, heavily stress the argument in relation to staff expertise.

  102. Such as premises, IT, financial control, HR and other central support services.

  103. Briault, ‘Rationale’, loc. cit. n. 3, has listed numerous fields in which synergies can be achieved, including support services, data and statistics, authorisation procedures, reporting requirements, consolidation rules and guidance, single entry point, cross-sectoral issues like Y2K, personnel, training, investigations and information to the public.

  104. See Ferran, loc. cit. n. 3, at p. 24, referring to Goodhart, et al., op. cit. n. 45, at p. 154; K. Mwenda, and A. Fleming, ‘International Developments in the Organisational Structure of Financial Services Supervision’, World Bank (2001), available at: http://wbln0018.worldbank.org/html/FinancialSectorWeb.nsf/(attachmentweb)/Uni-Fin-Serv-Supervision/$FILE/Uni-Fin-Serv-Supervision.pdf#search=%22mwenda%20fleming%20International%20developments%22.

  105. See Davies in nn. 2 and 3, referred to by Ferran, loc. cit. n. 3, at p. 19 and n. 114.

  106. In the United Kingdom, ‘the proportionality principle provides a measure against which the FSA must judge whether the regulatory compliance costs are justifiable’. See Ferran, loc. cit. n. 3, at p. 18. But supervised firms have never complained about cost being too low or supervision being too light.

  107. Čihák and Podpiera, loc. cit. n. 3, at p. 26; Briault, ‘Rationale’, loc. cit. n. 3, at p. 19, refers to a reduction in the costs of supervision and points to the effects on supervised entities due to the integrated approach to regulation.

  108. This point was also mentioned by Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 3.1 et seq., where it was linked to better and more ample financing, allowing better staff recruitment, remuneration and advancement.

  109. See European Financial Services Round Table (EFR), ‘On the Lead Supervisor Model and The Future of Financial Supervision in the European Union’ (June 2005), available at: http://www.efr.be/members/upload/news/22676EFRlsvfinal-June2005.pdf.

  110. See, e. g., CEBS, ‘Guidelines on the Implementation Validation and Assessment of Advanced Credit and Operational Risks Approaches’ (4 April 2006) and several other guidelines published by the CEBS.

  111. See EFR, loc. cit. n. 109. Strengthening home country control is also favoured by K. Lannoo, ‘Challenges to the Structure of Financial Supervision in the EU’, CEPS Report (2 July 2000); Wymeersch, loc. cit. n. 7, at sections 3.3 and 3.4. Those firmly opposed to extending the home country principle are C. McCarthy, ‘How Should International Financial Service Companies Be Regulated?’, Gresham Lecture at Sir Thomas Gresham College, London, 22 September 2004, FSA Speech 2004/196, para. 24, available at: http://www.fsa.gov.uk/pubs/speeches/sp196.html; C. McCarthy, ‘How Do We Achieve Regulatory Convergence in Practice?’, Conference at the Financial Markets Group, London School of Economics, 8 December 2004, FSA Speech 2004/218, para. 18, available at: http://www.fsa.gov.uk/pubs/speeches/sp218.html; Y. Avgerinos, ‘Problems with Home Country Control and Investment Services’, in Andenas and Avgerinos, op. cit. n. 1, at p. 83 et seq.

  112. Briault, ‘Rationale’, loc. cit. n. 3, at p. 18, mentions a list of efficiency advantages. H. Davies, ‘Designing a System of Financial Regulation’, Peking University Lecture, 20 June 2006, available at: http://www.lse.ac.uk/collections/meetthedirector/, strongly underlines this ‘single entry point’ aspect.

  113. For example, the merger of a bank can give rise to a series of regulatory obligations that are not necessarily coordinated: approval of the bank’s shareholders and of the management, approval of the merger transaction itself, disclosure of new shareholders, vetting of the corporate documents and drawing up of a merger prospectus, to name just a few.

  114. For example, if the draft prospectus was not very explicit on law suits against the bank, the banking supervisor could clarify, for example, on the materiality of certain disclosures.

  115. Some plead for a twenty-sixth regime at European level. See I. Mortimer-Schutss, ‘Regulatory and Supervisory Convergence: The Case for a Dual System with Choice’, AEI-Brookings Joint Center, Related Publication 05–39 (December 2005), available at: http://aei.brookings.org/publications/abstract.php?pid=1033. However, there are strong arguments against this solution, see Wymeersch, loc. cit. n. 7, at p. 1008.

  116. Taylor, op. cit. n. 46, at p. 15, fears that the supervisor might become ‘over-mighty, a bureaucratic leviathan divorced from the industry it regulates’ (also cited by Goodhart, et al., op. cit. n. 45, at p. 153); Avgerinos, loc. cit. n. 2, mentions a similar concern for a European securities regulator. See Briault, ‘Rationale’, loc. cit. n. 3, at p. 23, as to the response given by the UK Government, mainly by strengthening the accountability. Overall cost comparisons are not available yet.

  117. E. Demaestri and F. Guerrero, ‘Financial Supervision: Integrated or Specialized? The Case of Latin America and the Caribbean’, 14(2) Financial Markets, Institutions & Instruments (May 2005) pp. 43–106. For some data obtained from the conference of integrated supervisors, see infra n. 218.

  118. It has been argued that the integrated model would mainly be adapted to States with smaller financial markets. See further section 6.2 for the factual situation.

  119. ‘Potential moral hazard would result from a public perception that the risk spectrum among financial institutions has disappeared or become blurred.’ Goodhart, et al, op. cit. n. 45, at p. 154.

  120. Goodhart, loc. cit. n. 1., at p. 30 et seq.

  121. Lannoo, ‘EU Financial Regulation’, loc. cit. n. 4, at p. 31, cites the case of clearing and settlement regulation, which ultimately resulted in an independent decision of the Commission, proposing a Code of Conduct.

  122. Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 4.12; Avgerinos, loc. cit. n. 3, at p. 31, as far as a European securities regulator would be concerned.

  123. On the issue of independence, see M. Quintyn and M. Taylor, ‘Regulatory and Supervisory and Financial Stability’, IMF Working Paper WP/02/46 (2002), available at: http://www.imf.org/external/pubs/ft/wp/2002/wp0246.pdf.

  124. The standard instruments for accountability relate to the way the members of the board are appointed, the presence of non-executive members on a supervisory board, collective decision making, reporting to the public by way of an annual report, reporting to parliament, judicial review, etc. For the United Kingdom, see Briault, ‘Rationale’, loc. cit. n. 3, at p. 11, mentioning that a clear allocation of responsibilities between the FSA, the Treasury and the BoE and a framework for close cooperation are important aspects of accountability. See, in general, E. Hüpkes, M. Quintyn and M. Taylor, ‘The accountability of Financial Sector Supervisors, Principles and Practice’, IMF Working Paper WP/05/51 (2005), available at: http://www.imf.org/external/pubs/ft/wp/2005/wp0551.pdf#search=%22lastra%20Accountability%22.

  125. See the statements by Greenspan (p. 18) and Ferguson (p. 30), cited in Goodhart, ‘Organisational Structure’, loc. cit. n. 1. On the subject in general, see G. dell’Ariccia and R. Marquez, ‘Competition among Regulators’, IMF Working Paper WP/01/73 (2001).

  126. For an analysis as far as the European markets are concerned, see Lannoo, ‘EU Financial Regulation’, loc. cit. n. 4, at p. 13 et seq., focusing on p. 19 on dual listings.

  127. See M. Becht, C. Mayer and H. Wagner, ‘Corporate Mobility and the Costs of Regulation’, European Corporate Governance Institute Working Paper 07/2006 (May 2006). However, directives in financial matters often provide that the seat should be where the principal place of business is located (post BCCI-rule).

  128. For example, by allowing for a lighter regime for professional dealings. See Ferran, loc. cit. n. 3, at p. 18 for the UK answer.

  129. L. Bini Smaghi, Speech, Milan, 9 March 2006, available at: http://www.ecb.int/press/key/date/2006/html/sp060309.en.html, strongly underlines this point, also in connection with the position of central banks.

  130. Llewellyn, loc. cit. n. 3, at p. 8.

  131. Hüpkes, et al., op. cit. n. 124; A. Page, ‘Regulating the Regulator — A Lawyer’s Perspective on Accountability and Control’, in E. Ferran and C.A.E. Goodhart, eds., Regulating Financial Services and Markets in the Twenty-First Century (Oxford, Hart 2001) p. 127; R. Lastra and H. Schams, ‘Public Accountability in the Financial Sector’, in Ferran and Goodhart, op cit. n. 131, at p. 165.

  132. See Lastra and Schams, loc. cit. n. 131, at p. 165 et seq.; also Ferran, loc. cit. n. 3, at p. 25.

  133. See Hüpkes, et al., op. cit. n. 124 and the attached tables.

  134. Very elaborate in the case of the CESR, see: http://www.europefesco.org/v2/default.asp.

  135. In the Scandinavian countries, ombudsmen schemes deal with consumer conflicts. See Taylor and Fleming, ‘Lessons from the Scandinavian Experience’, loc. cit. n. 3, at p. 2; the same has been introduced in Belgium by Royal Decree of 21 June 2006, Official Journal of 4 July 2006, for the insurance sector. A somewhat different scheme applies to the banking sector.

  136. In that sense, see Tafara, loc. cit. n. 52, referring to the US President’s Working Group on Financial Markets. Tafara argues that the integrated system creates the risk of dominance if one regulatory culture would subsist.

  137. This solution is advanced by Goodhart et al, op. cit. n. 45, at p. 156 et seq.; Taylor, op. cit. n. 46, at p. 15; Llewellyn, loc. cit. n. 3, at p. 27; and Ferran, loc. cit. n. 3, at p. 21, but it is not realistic as legislators rarely establish priorities between several bodies of law.

  138. Some laws contain statements of objectives, but priorities remain the subject of controversy. With regard to the German Banking Act, see ECJ, Case C-222/02 Peter Paul and others [2004] ECR I-9425. For comments, see supra n. 18.

  139. Briault, ‘Rationale’, loc. cit. n. 3, at p. 21. Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 4.9. Differences of opinion at staff level may be stimulating but should not prevent final decision making by the governing body. For criticism, see Ferran, loc. cit. n. 3, at p. 22.

  140. Bini Smaghi, loc. cit. n. 129, rightly mentions the usefulness of committee decisions in this context. Cf. Goodhart, ‘Organisational structure’, loc. cit. n. 1, at p. 25, advocating internal meetings instead of inter-agency meetings; and Goodhart, et al., op. cit. n. 45, at pp. 146 and 172, admitting the danger of rivalries and disputes.

  141. In Germany: BAFin (see section 6.2.3) and in Belgium according to several articles of the Law of 2 August 2002 (see section 6.2.5). In Denmark, too, the legislation applicable to the different sectors has not been harmonised. See Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 2.47.

  142. The United Kingdom moved to an integrated legal framework, while keeping separate legal regimes for the sectors supervised. See Ferran, loc. cit. n. 3, at p. 3.

  143. For a clear list of the pros and cons, see Llewellyn, loc. cit. n. 3.

  144. Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at p. 13.

  145. See, inter alia, the papers by Llewellyn, loc. cit. n. 3, at p. 28 et seq.; Goodhart, ‘Organisational Structure’, loc. cit. n. 1, at p. 7 et seq., analyses arguments for and against separation and concludes that combination is to be preferred for developing and emerging countries but less so for developed economies. See also Llewellyn, loc. cit. n. 3, at p. 39. For empirical data, see J. Barth, L. Dopico, D. Nolle and J. Wilcox, ‘Bank Safety and Soundness and the Structure of Bank Supervision: A Cross-Country Analysis’, paper presented at the 2001 FMA Annual Meeting, Toronto, Canada, 18 October 2001, SSRN 639765.

  146. See most of the papers referred to in n. 1.

  147. For example, Goodhart, ‘Organisational Structure’, loc. cit. n. 1, at p. 33.

  148. See Freytag and Masciandaro, loc. cit. n. 1, at pp. 10 and 20.

  149. Which is the case in Spain, Italy, Portugal and Greece. In some countries, this includes non-bank financial institutions, such as bureaux de change.

  150. Which is the case in Germany and Austria. The relationship is different in France, where the Commission bancaire functions as a separate department of the Banque de France, see: http://www.banque-france.fr/fr/supervi/supervi_banc/cb/cb.htm.

  151. For the United Kingdom, see section 6.2.1; for Belgium, within the Financial Stability Committee, see section 6.2.5.

  152. Even if, as S. Oosterloo and J. de Haan, ‘A Survey of International Frameworks for Financial Stability’, Occasional Studies Vol. 1, No. 4, (Amsterdam, De Nederlandse Bank 2003) remark, central banks have a formal legal mandate to undertake this task in very few countries.

  153. Llewellyn, loc. cit. n. 3, at p. 10.

  154. Mentioned by Goodhart, ‘Organisational Structure’, loc. cit. n. 1, at p. 43.

  155. Goodhart, et al., op. cit. n. 45, at p. 154; A. Crockett, ‘Issues in Global Financial Supervision’, Speech, BIS (1 June 2001), available at: http://www.bis.org. See Briault, ‘FSA Revisited’, loc. cit. n. 3, at p. 332, doubts whether differences between ‘systemic risk regulator’ and a ‘deposit protection regulator’ could not be taken on board by a single regulator through appropriate differentiation, for example, by differentiating the intensity of supervision. He further deems that cooperation among existing regulators allows them to deal with most of the pending issues.

  156. As does Ferran, loc. cit. n. 3, at p. 4, referring to the need for close cooperation between the banking and securities sides of supervision, mentioning especially the Barings case. Goodhart, ‘Organisational Structure’, loc. cit. n. 1, at pp. 11 and 12, mentions that, as issues of financial consumer protection increasingly have to be dealt with, efficiency and cost saving implies placing supervision outside the central bank. He also mentions the additional burden flowing from micro-supervision and the risk of diverting attention away from the monetary assignment (p. 21).

  157. C. Goodhart and D. Schoenmaker, ‘Institutional Separation Between Supervisory and Monetary Agencies’, in C. Goodhart, The Emerging Framework of Financial Regulation (London 1998); C. Goodhart, The Central Bank and the Financial System (London, Macmillan 1995) ch. 16; M. Taylor, ‘Central Bank Independence, The Policy Background’, in M. Blair, R. Cranston, C. Ryan and M. Taylor, eds., Bank of England Act 1998 (London, Blackstone 1998) pp. 19–20; Ferran, loc. cit. n. 3, at p. 6, refers to a ‘finely balanced act’; Llewellyn, loc. cit. n. 3, at p. 29 et seq., refers to writings by Cukierman (1992), Brimmer (1989) and Heller (1991); Čihák and Podpiera, loc. cit. n. 3, at p. 14, cite the case of a central bank postponing a raise in interest rates out of fear of jeopardising some of the supervised banks or a central bank postponing a bank’s failure to avoid a crisis in the financial markets. A bank that is aware of an impending insolvency may prefer to stop all payments to secure its position. See also European Parliamentary Financial Services Forum, ‘The structure of Financial Services Supervision’ (8 October 2002) and the criticism of the ECB’s proposal, ‘The role of Central Banks in Prudential Supervision’ (2001). The argument was refuted by Padoa-Schioppa, ‘Financial Supervision’, loc. cit. n. 1, at p. 165.

  158. Goodhart, ‘Organisational Structure’, loc. cit. n. 1, at p. 31.

  159. This is the reason why Art. 12(2) of the Market Abuse Directive and Arts. 57 and 58 of the MiFID require all Member States to introduce the same ‘toolkit’ for tracing market abuse cases, a field where cross-border cooperation is essential.

  160. So, for example, regarding the question to what extent the secrecy obligations that are laid down in one of the directives applicable to supervisors in the same line of business would also apply to contacts with supervisors in different lines of business, especially if some of these activities have not yet been harmonised (e. g., in the field of supervision of securities settlements, which has not yet been harmonised). The rules have systematically been refined allowing for cross-sectoral communications. Compare the still restrictive attitude on Art. 25(2) of ISD Directive 93/22/EEC of 10 May 1993, with the broader reading in Art. 12 of Directive 2002/87/EC of 16 December 2002 (on conglomerates) and the obviously more restrictive reading in Art. 54(4) of the MiFID.

  161. On the preparatory work for Solvency II, see supra n. 10.

  162. See BIS, ‘Enhancing Corporate Governance for Banking Organisations’ (29 July 2005), available at: http://www.bis.org/press/p050729a.htm. Group governance issues, including governance of the sectoral subsidiaries, call for increasing attention in today’s supervisory practice.

  163. The extension of the IFRS to solo accounts is still controversial, due to the resulting tax consequences. In some States, even solo accounts of group banking or insurance companies will be drawn up in accordance with the IFRS, but only for reporting purposes.

  164. See T. Padoa-Schioppa, ‘How to Deal with Merging Pan-European Financial Institutions’, Speech, ECB, 3 November 2004, available at: http://www.ecb.int/press/key/date/2004/html/sp041103.en.html.

  165. In that sense, A. Enria and J. Vesala, ‘Externalities in Supervision: The European Case’, in Kremers, Schoenmaker and Wierts, op. cit. n. 1, pleading for a cooperative setting.

  166. See the resolution of the EU Parliament of 4 July 2006 on the ‘consolidation the European financial services industry’ calling for opening a debate on the structure of supervision of EU financial markets and to create a committee of wise persons. According to R. Lastra, ‘Regulating European Securities Markets: Beyond the Lamfalussy Report’, in Andenas and Avgerinos, op. cit. n. 1, at p. 219, the passage in the Lamfalussy Report arguing for Europeanisation of supervision in case the present comitology approach would appear to be insufficient refers to the integration of the different lines of supervision.

  167. See infra n. 160.

  168. For CEBS, CEIOPS and CESR, see Commission Decision 2001/527/EC of 6 June 2001 establishing the Committee of the European Securities Regulators, OJ 2001 L 191/43; Commission Decision 2004/5/EC of 5 November 2003 establishing a Committee of European Banking Supervisors, OJ 2004 L 3/28; Commission Decision 2004/6/EC of 5 November 2003 establishing the Committee of European Insurance and Occupational Pensions Supervisors, OJ 2004 L 3/30.

  169. Lastra, loc. cit. n. 2, accepting a single committee for regulation but not for supervision and furthermore pointing to the subsidiarity rule of the European Treaty. See Wymeersch, loc. cit. n. 7, indicating that, as far as rulemaking is concerned, integration in Europe has already achieved a high degree of central decision making in the level 1 and 2 directives and in the regulations. The situation is different in the field of supervision, where proximity and subsidiarity better suit the needs of the markets.

  170. See the report of the Zimmerli Commission, available at: http://www.efd.admin.ch/dokumentation/medieninformationen/archiv/03023/index.html?lang=en and infra n. 211.

  171. The Polish Financial Supervision Authority has been in operation since 19 September 2006, see: http://www.kpwig.gov.pl/index-ang.htm.

  172. Even China announced that the issue has been put on the agenda.

  173. For an overview, see the attached table.

  174. See: http://www.c-ebs.org; http://www.ceiops.org; and http://www.cesr-eu.org.

  175. Especially France, Italy, Spain, Portugal and Luxembourg.

  176. In the same sense, see the findings of Freytag and Masciandaro, loc. cit. n. 1, according to which ‘the degree of supervision consolidation seems to be inversely correlated with the central bank involvement’. See also C. Goodhart, The Central Bank and the Financial System (Basingstoke, Macmillan 1995) p. 344 (with D. Schoenmaker).

    Book  Google Scholar 

  177. Except the portfolio managers that are supervised by the AMF.

  178. Comité des établissements de crédit et des entreprises d’investissement (CECEI), chaired by the Bank’s governor.

  179. Art. L. 310-12 of the Code des assurances, as modified by the Law of 1 August 2003 (see infra n. 181).

  180. Comité consultatif de la législation et de la réglementation financière (CCLRF), previously known as the Comité de la réglementation bancaire et financière (CRBF).

  181. Loi no 2003-706 du 1er août de sécurité financière, JO no 177 du 2 août 2003.

  182. Ibid.

  183. See M. Prada, ‘Intervention’, COB Bulletin 342 (January 2000). For a comparative overview, see P.-H. Conac, ‘La fusion de la COB et du CMF’, in H. De Vauplane and J.J. Daigre, eds., Mélanges AEDBF France, III (Paris, Banque Editeur 2001) p. 59.

  184. A cross-sectoral coordinating body was created in 1999, under the name Collège des autorités de contrôle des entreprises du secteur financier (CACESF), composed of the heads of the five operational supervisors (Art. L. 631-2 of the Code monétaire et financier).

  185. This is the regime of ‘démarchage’. See Art. L. 341-1 of the Code monétaire et financier.

  186. Art. 42 of the Testo Unico Finanziario.

  187. For a useful and critical analysis of historical elements, including consumer credit and mortgage intermediaries, leading to the choice in favour of the ‘single regulator’, see Ferran, loc. cit. n. 3.

  188. However, the City Code on Takeovers and Mergers has been endorsed by the FSA, enabling the FSA to take enforcement action against persons authorised under the FSAM 2000.

  189. See: http://www.frc.org.uk.

  190. Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 2.5, give an overview of the developments that led to the integrated model in the Scandinavian countries. Taylor and Fleming, ‘Lessons from the Scandinavian Experience’, loc. cit. n. 3, at p. 45, explain why insurance supervision has remained in the hands of the ministry, although the discussion appears to have been going on for quite some time. In Sweden, the central bank has never been in charge of banking supervision.

  191. See Taylor and Fleming, ‘Lessons from the Scandinavian Experience’, loc. cit. n. 3, at p. 43.

  192. For an analysis, see B.S. Aamo, in Masciandaro, op. cit. n. 1, at p. 203.

  193. For an analysis, see I. Bonde, in Masciandaro, op. cit. n. 1, at p. 182.

  194. As stated in Art. 1 of the Act. The supervisor obtains its infrastructure, personnel and other means from the bank while remaining independent in its actions and decision making.

  195. For an analysis, see H. Bjerre-Nielse, in Masciandaro, op. cit. n. 1, at p. 175.

  196. For the German approach, see M. Schüler, ‘Integrated Financial Supervision in Germany’, ZEW Discussion Paper No. 04-35 (2004), available at: ftp://ftp.zew.de/pub/zew-docs/dp/dp0435.pdf; T. Filipova, ‘Concept of Integrated Financial Supervision and Regulation of Financial Conglomerates: The Case of Germany and the United Kingdom’, ESNIE Research Paper (2004), available at: http://esnie.u-paris10.fr/en/archives/2004.php?id=63.

  197. See J. Sanio, ‘The New Single Regulator in Germany’, in T. Kuppens, H. Prast and S. Wesseling, eds., Banking Supervision at the Crossroads (Cheltenham, Elgar 2003) p. 55, For an analysis of the German system, see M. Schüler, in Masciandaro, op. cit. n. 1, at p. 288.

    Google Scholar 

  198. See § 7 of the Bundesbank Act of 22 October 1992, as amended by the Sixth Act Amending the Bundesbank Act of 22 December 1997.

  199. Bundeswertpapieraufsicht, on the basis of the Finanzmarktaufsichtsbehördengesetz (FMABG). For an analysis, see A. Grünbichler, in Masciandaro, op. cit. n. 1, at p. 159.

  200. According to the Central Bank and Financial Services Authority Act 2003. The formula was criticised in J. Westrup, ‘Financial Services Regulation in Ireland — The Accountability Dimension’, TCD Policy Institute, University of Dublin, Blue Paper No. 10 (17 September 2002), available at: http://www.tcd.ie/Policy_Institute/abstract10.php. For an analysis, see J. Westrup, in Masciandaro, op. cit. n. 1, at p. 355.

  201. For a description, see the website of IFSRA at: http://www.ifsra.ie/. IFSRA will also ‘monitor competition in the market for financial services by working with the Competition Authority’.

  202. The new scheme is not uncontroversial. See ‘Financial Supervision Commission in the Works’, The Warsaw Voice, 5 April 2006, available at: http://www.warsawvoice.pl/view/11023/; and the ECB’s opinion of 2 August 2006, available at: http://www.ecb.int/ecb/legal/pdf/en_con_2006_39_f_sign.pdf#search=%22financial%20supervision%20poland%22.

  203. For an analysis of the analysis leading to the adoption of the integrated supervisor, see P. Rococha, ‘Two-Phase Process of Integration of Financial Regulation and Supervision in the Czech Republic’, Document prepared by the Czech National Bank for the Annual meeting of bank supervisors from Central and Eastern Europe, Dubrovnik, Croatia, May 2004, available at: http://www.hnb.hr/dub-konf/fsi-bscee-2004/prezentacije.htm. In fact, all supervision has been centralised at the CNB.

  204. For an analysis, see L. Liive, in Masciandaro, op. cit. n. 1, at p. 229.

  205. For an analysis, see L. Balogh, in Masciandaro, op. cit. n. 1, at p. 258.

  206. In charge of banks, investment firms and bureaux de change.

  207. The Pensioen- en verzekeringskamer. It should be noted that some of the most important private pension funds in Europe are domiciled in the Netherlands.

  208. These relate to the admission of securities to the exchange, the approval of the admission prospectus and the interim information to be disclosed by listed companies.

  209. In a statement by the Minister of Finance of 2 April 1999. See Nota inzake de institutionele vormgeving van het toezicht op de financiële marktsector, Kamerstukken II 1998/99, 26 4666, No. 1.

  210. The Swiss takeover board, see: http://www.takeover.ch/.

  211. The so-called Zimmerli Report (FINMA), ‘Integrierte Finanzmarktaufsicht, Sanktionen in der Finanzmarktaufsicht, Erweiterung der Prudentiellen Aufsicht’, in Eidgenossisches Finanzdepartement, available at: http://www.efd.admin.ch/suchen/index.html?lang=de&keywords=zimmerli&search_mode=AND&from_day=01&from_month=01&from_year=2003&to_day=07&to_month=09&to_year=2006&mitteilungstyp=&themen_filter= x Zufferey Report.

  212. Amt für Finanzdienstleistungen (FMA), an independent government agency, Law of 18 June 2004.

  213. See: http://www.rba.gov.au/PublicationsAndResearch/Bulletin/bu_oct95/bu_1095_4.pdf#search=%22council%20financial%20supervisors%20australia%22.

  214. As mentioned above, the federal structure of the State often leads to more complex supervisory schemes. For an analysis, see Grünbichler, in Masciandaro, op. cit. n. 1, at p. 159.

  215. See the call by David Brown, Chairman of the Ontario Securities Commission, for a pan-Canadian body, Reuters briefing, 20 November 2001; Financial Post: Editorial by Raymond Protti, President of the Canadian Bankers Association, National Post, 8 February 2002 (gives figures about the comparative cost of regulation and number of employees: there are over fifty financial supervisors — federal, provincial and territorial departments and agencies — employing 3,780 employees, compared to the United Kingdom, with 2,765 employees for a four times bigger market). In 2004, Quebec merged several of its regulatory agencies in a new Autorité des Marchés Financiers. See S.J. Struthers and D. Bénay, ‘Québec Creates a Single Financial Services Industry Regulator and Responds to the U.S. Sarbanes-Oxley Act’, available at: http://www.mccarthy.ca/search/pub_search_results.asp, relating to securities, insurance, trust and saving companies. Stephen L. Harris, ‘The Single Financial Market Regulator’, 16 June 2006, available at: http://www.carleton.ca/spa/Faculty/Notes%20for%20The%20Single%20Financial%20Market%20CD%20Howe%20June%202006.ppt, raises the issue of creating one single financial regulator, including OSFI, also in light of the difficulties in merging the provincial securities regulators. Insurance-related consumer protection is also provincial, while credit unions and securities companies are supervised at both federal and provincial level. See Llewellyn, loc. cit. n. 3, at p. 36.

  216. ‘[A] crazy quilt of agencies,’ according to I. Walter, ‘Financial Integration Across Borders and Across Sectors: Implications for Regulatory Structures’, in Kremers, Schoenmaker and Wierts, op. cit. n. 1, at p. 41.

  217. See: http://www.fscey.gov.tw/ct.asp?xItem=508412&CtNode=2225&mp=5 and http://www.fscey.gov.tw/ct.asp?xItem=508412&CtNode=2.

  218. See: http://www.adb.org/Projects/APEC/Market_Intermediaries/Integrated_Financial_Supervision_KOR.pdf#search=%22taylor%20twin%20peaks%20regulatory%22.

  219. R. McGregor, ‘Beijing Debates New Financial Super-Regulator’, Financial Times, 11 September 2006.

  220. See, e. g., Taylor and Fleming, ‘Lessons from the Northern European Experience’, loc. cit. n. 3, at section 4.7.

  221. Goodhart, ‘Organisational Structure’, loc. cit. n. 1.

  222. Demaestri and Guerrero, loc. cit. n. 117; R.Y. Siregar and J.E. Williams, ‘Designing an Integrated Financial Supervision Agency: Selected Lessons and Challenges for Indonesia’, Centre for International Economic Studies, University of Adelaide, Discussion Paper No. 0405, available at: http://www.adelaide.edu.au/cies/papers/0405.pdf; Davies, loc. cit. n. 112; S.A. Lumpkin, ‘Alternative Approaches to Supervision of Financial Services’, III Conference on Insurance Regulation and Supervision in Latin America, Honduras, 15–18 July 2002, available at: http://www.oecd.org/dataoecd/29/31/1939352.pdf#search=%22alternative%20approaches%20supervision%22.

  223. A. Tiwari, ‘We Need a Single Regulator’, National Post, 31 May 2004, available at: http://osgoode.yorku.ca/media2.nsf/83303ffe5af03ed585256ae6005379c9/14842feeec5694de85256ea1004cb3a3!OpenDocument. On the basis that the Indian markets are still not sufficiently developed, the opposite view is defended by S. Subramanian and N. Hetamsaria, ‘Does India Need a Single Financial Regulator?’, Rediff News, 13 February 2006, available at: http://www.rediff.com/money/2006/feb/13guest.htm.

  224. H. Davies, ‘The Role of the Regulator’, Speech, Cairo, 17 June 2006, available at:http://www.lse.ac.uk/collections/meetthedirector/.

  225. Siregar and Williams, loc. cit. n. 222.

  226. For a concurring view, see Goodhart, et al., op. cit. n. 45, at p. 181.

Download references

Author information

Authors and Affiliations

  1. Ghent University, Belgium

    Eddy Wymeersch (Professor)

Authors
  1. Eddy Wymeersch
    View author publications

    You can also search for this author in PubMed Google Scholar

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Wymeersch, E. The Structure of Financial Supervision in Europe: About Single Financial Supervisors, Twin Peaks and Multiple Financial Supervisors. Eur Bus Org Law Rev 8, 237–306 (2007). https://doi.org/10.1017/S1566752907002376

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1017/S1566752907002376

Keywords

Search

Navigation