Shocks and Time: The Development of the European Financial Assistance Regime

in Journal of Common Market Studies (2022)

This paper analyses the impact of economic crises on the development of European financial assistance. It demonstrates that crisis episodes that have taken place over the last five decades have ... [more ▼]

This paper analyses the impact of economic crises on the development of European financial assistance. It demonstrates that crisis episodes that have taken place over the last five decades have significantly altered the design of European Union emergency support. This paper illustrates how solutions adopted in formative moments–including the 1973 oil shock, the Eurozone crisis, and the Covid-19 pandemic–and their long-term consequences led to the smorgasbord of instruments of the present financial assistance structure. By applying a historical institutionalist approach, combining insights from studies of critical junctures and gradual change, this contribution explains how economic shocks contributed to change in financial assistance, while also highlighting mechanisms that led to the continuation of specific elements of the assistance structure. [less ▲]

Bending and Breaking Europe's Single Resolution Mechanism: the case of Italy

in Journal of Common Market Studies (2019)

This paper examines the political economy and law of bank resolution in the case of Italy—specifically its treatment of three failing banks that were resolved in 2016/2017—Monte de Paschi, Veneto and ... [more ▼]

This paper examines the political economy and law of bank resolution in the case of Italy—specifically its treatment of three failing banks that were resolved in 2016/2017—Monte de Paschi, Veneto and Vicenza banks. These three cases stand out for the relatively large degree of discretion exercised by national resolution and state aid authorities, ultimately with the permission of their European counterparts. This paper examines the motivations driving Italian authorities to lobby the Commission for leeway in applying the Bank Recovery and Resolution Directive, and analyses the intricacies of the legal framework to underline the extent of discretion exercised by policy makers. It concludes that the discretion visible in these three cases is not (entirely) contained within EU law, and that bending the law or turning a blind eye to infractions was key to understanding the EU approach to Italy. [less ▲]

The Political Economy of European Capital Markets Union

in Journal of Common Market Studies (2016), 54(S1), 185203

In September 2015 the European Commission put forward an Action Plan for Capital Markets Union (CMU) and two legislative proposals concerning securitization. Further legislative activity was to follow ... [more ▼]

In September 2015 the European Commission put forward an Action Plan for Capital Markets Union (CMU) and two legislative proposals concerning securitization. Further legislative activity was to follow. This contribution undertakes a preliminary investigation of the ‘making’ of the CMU project, explaining what CMU is, its economic and political objectives, as well as its main drivers and obstacles. It is argued that the likely winners and losers of the project – both financial groups and specific Member State governments – largely formed the constituencies for and against CMU. The organization of national financial (and specifically banking) systems largely directed Member State government preferences on CMU. The potential winners were also influential in promoting a specific form of CMU, or at least specific priorities in the construction of CMU. The centrality of banks in EU national financial systems explains the priority attached to securitization in the first stage of the CMU project. [less ▲]

Supranational Banking Supervision in Europe: The Construction of a Credible Watchdog

in Journal of Common Market Studies (2015), 53(s1),

Does the institutional design of the European Single Supervisory Mechanism (SSM) and its first assessment of systemically important bank stability bolster the credibility of supranational banking ... [more ▼]

Does the institutional design of the European Single Supervisory Mechanism (SSM) and its first assessment of systemically important bank stability bolster the credibility of supranational banking supervision in Europe? One crucial measure of credibility with regard to the SSM and NCA supervision of less significant banks — the large majority of euro area headquartered bank not subject to direct ECB supervision — is the assurance of consistent supervision in the euro area. This involves some degree of convergence of NCA supervision in order to prevent national supervisory forebearance of struggling banks. This contribution thus examines whether or not the design of the SSM provides the foundation to build convergence in euro area supervision of less significant banks, despite very different national supervisory practices and institutional frameworks. The Principal-Agent approach is used to assess the credibility of the SSM design in terms of providing the foundation for consistent supervision. This contribution also examines the credibility of the ECB’s direct supervision of significant banks. The management of the ECB’s Comprehensive Assessment of signficant banks can be seen as the first step in demonstrating the capacity of the ECB to make difficult decisions with regard to the stability of the euro area’s banks. [less ▲]

Book Review

in Journal of Common Market Studies (2014), 52(3),

The Ongoing Struggle to 'Protect' Europe from its Money Men

in Journal of Common Market Studies (2012), 50(s1), 99-115

This analysis of two of the main pieces of EU financial legislation developed in 2011 demonstrates the extent to which they were designed and subsequently shaped to respond to the preoccupations of ... [more ▼]

This analysis of two of the main pieces of EU financial legislation developed in 2011 demonstrates the extent to which they were designed and subsequently shaped to respond to the preoccupations of powerful EU member states linked to domestic institutional frameworks and national financial systems. On OTC derivatives, EMIR was modified to accommodate German concerns about the incompatibility of the national stock exchange, a major European player in trading and clearing derivatives, with the legislation as initially drafted by the Commission. The CRDIV-CRR was drafted by the Commission to take into consideration European specificities in the implementation of international guidelines on capital requirements and, in particular, French and German concerns on, respectively, the double counting of insurance subsidiary capital and the use of hybrid capital to meet minimum capital thresholds and the definition of liquidity ratios. The Commission’s draft and subsequent positioning directly challenged British and other member state government preference to push for higher requirements in order to reinforce the stability of nationally-based banks and avoid a repeat of 2007-09 when huge amounts of public money were spent to avoid bank collapse. [less ▲]

Regional Representations in the EU: Between Diplomacy and Interest Mediation, by C. Rowe

in Journal of Common Market Studies (2012), 50(4), 687-688

Gesture Politics?: explaining financial regulatory reform in the European Union

in Journal of Common Market Studies (2010), 48(s1), 119-141

We accept the insights from several distinct analytical approaches to explain national policy-making and EU-level policy. We apply systemic realism and an approach focused upon interest group preferences ... [more ▼]

We accept the insights from several distinct analytical approaches to explain national policy-making and EU-level policy. We apply systemic realism and an approach focused upon interest group preferences. We also accept the usefulness of insights drawn from comparative political economy (CPE). We agree with CPE approaches to the extent that they insist that government policies seek to protect national political economies (as in Quaglia, forthcoming). However, we also warn against a CPE approach that relies upon a stagnant understanding of Varieties of Capitalism (VoC) (Hall and Soskice, 2001) because such an approach ignores significant changes that have taken place in European financial systems and capitalisms over the past decade (Hancké et al., 2007). We argue that to understand fully the lack of developments on banking regulation at the EU level and EU-level policy co-ordination on international regulation, it is necessary to incorporate other insights, notably from international policy economy (IPE), into an understanding of how national financial systems and economic interests shape national policy. We cannot divorce this study of EU-level responses to the financial crisis from considerations of the obstacles facing financial market integration in the EU. Clearly, support for integration shaped national policymaking on EU-level developments on financial sector matters. However, we argue that integration considerations were secondary. Our focus upon the Member States with the three largest economies and financial sectors – Germany, France and the UK – and the influence of the positions of the financial interests in these countries corresponds to a Liberal Intergovernmentalist (LI) analysis. However, we do not seek to draw broader conclusions about the applicability of LI to explain developments in this policy area. [less ▲]

Die Krise but not La Crise? The financial crisis and the transformation of German and French banking systems

in Journal of Common Market Studies (2009), 47(5), 1015-1036

This article explores what the financial crisis shows about changes in the German and French banking systems, the two largest in continental Europe. In particular, we highlight processes of ... [more ▼]

This article explores what the financial crisis shows about changes in the German and French banking systems, the two largest in continental Europe. In particular, we highlight processes of financialization – defined here as the increased trading of risk. We focus on an apparent contradiction: why did the supposedly more protectionist and conservative German banking system suffer much higher losses than the more liberalized French system? This article also examines the responses of German and French banks and governments to the crisis and speculates how far these responses might limit future financialization and shape national banking systems. [less ▲]