EU financial sector law: a complex matter

The European Union’s financial services law has developed into a highly technical and complex field.

The European Commission states on the internet: ‘Financial services regulation should contribute to an environment that protects consumers, promotes market integrity and supports investment, growth and jobs.’ [1] At the same time, financial Services policy should deliver stable, secure and efficient financial markets and ensure coherence and consistency between the different policy areas, such as banking, insurance, securities and investment funds, financial markets infrastructure, retail financial services and payment systems.

In fact, there has been a very remarkable development in this field since the setting up of the European Economic Communities (EEC) in the 1950s. Originally, there was no specific Community legislation on financial services (ie no harmonisation through secondary law). Instead, the general rules of the EEC Treaty applied, notably those on the internal market and, more specifically, on the freedom of establishment and on the free movement of services. In 1961, general programmes were adopted on the abolition of obstacles to these economic freedoms in the financial sector. As of the 1960s, secondary Community law on establishment and services followed. For example, in the field of insurance internal market legislation was first adopted with respect to co-insurance in the 1960s and as of the 1970s also with respect to direct insurance (here, several generations of directives followed each other). In comparison, legislation on capital markets is more recent.

The publication of the European Commission Financial Services Action Plan in 1999 and of the White Paper on Financial Services Policy in 2005 spurred further legislative activity. Following the outbreak of the financial crisis in 2008, financial sector reform was undertaken in view of achieving the stabilisation of financial markets, with a particular focus on filling in the gaps in financial sector regulation and on strengthening the supervision of the financial sector. Based on the Commission’s Roadmap for the creation of a Banking Union, the European Union (EU) institutions agreed to establish a Single Supervisory Mechanism and a Single Resolution Mechanism for banks (essentially for countries in the euro-area). In a broader context, recent legislative activity concerns internal market topics such as market abuse (specifically in relation to the trade in securities) and shareholder rights (which is an issue of general company law that is also relevant for the financial sector). Finally, the EU is also working towards a Capital Market Union, which includes eg the modernisation of the in practice very important legislation on the prospectus to be published when securities are offered to the public or admitted to trading.

As a result of these developments, today’s EU financial sector law is a highly developed and complex field. Some of the instruments identified in the previous step in our course week are part of it, namely:

• AIFMD: Directive 2011/61/EU of the European Parliament and of the Council of 8 June 2011 on Alternative Investment Fund Managers and amending Directives 2003/41/EC and 2009/65/EC and Regulations (EC) No 1060/2009 and (EU) No 1095/2010, OJ 2001 L 174/1.
• EMIR: Regulation 648/2012/EU of the European Parliament and of the Council of 4 July 2012 on OTC derivatives, central counterparties and trade repositories, OJ 2012 L 201/1.
• MiFID II: Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU, OJ L 2014 L 173/349.
• MiFIR: Regulation 600/2014/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Regulation (EU) No 648/2012, OJ 2004 L 173/84.

Finally, it is not difficult to understand that the more sophisticated the level of development of the EU financial sector legislation, the more this poses a challenge for businesses established in countries outside the Union (ie in third states) that would like to be active on the Union market. This is all the more the case where the Union, in its harmonising legislation, includes unilateral rules about market access by economic operators from third countries, as is increasingly the case. This helps understand why business organisations such as the Swiss Banking Association or the Swiss Insurance Association are concerned about access to the EU market for their members.

Further reading

Consult the European Commission’s website on financial services.

Read the Commission’s Financial Services Action Plan of 1999.

Study the Commission’s White Paper on Financial Services Policy of 2005.

Learn about the Banking Union.

Learn about the Capital Market Union.

Read about the EU’s prospectus legislation.

Read about the EU’s market abuse legislation.

Read about the EU’s shareholder rights legislation

References

[1] European Comission: ‘Financial services policy’, published online.