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European Banking and Investment Services Law > I. Introduction > Flashcards

I. Introduction Flashcards

1
Q

What is financial law?

A
  • The law regulation the financial markets.
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2
Q

What is the function of the financial markets?

A
  • Money / credit supply
  • Channeling the money to where it is needed:
    • Financial markets as channels through which private savings find their way to industrial and commercial investments.
  • Intermediation between excess of money and demand of money.
    • Collection of savings, which are invested in credit or other financial transactions
    • Also intermediation by volume: collection of relatively small amounts (“retail”) and supplies them in relativelly large amounts.
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3
Q

What is the sectoral approach? What are the advantages?

A
  • Approach on the basis of traditional financial sectors.
    • Banking law: invluding law on deposit, payment and credit services
    • Securities law
  • Advantages:
    • European legislation has a grosso modo sectoral approach
    • Large domain is cut into smaller pieces which can be studied separately
    • Clarity
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4
Q

What are the disadvantages of the sectoral approach?

A
  • Sectoral approach does not reflect reality
  • “Blurring of sectors”:
    • Product level: complex products: eg. PRIPS
    • Level of financial intermediary: providing several services
      • = Allfianz strategies, bancassurance, assurfinance, bancassurfinance
  • Different legislation for economically similar financial products or intermediairies: bv. beleggingsverzekeringsproducten
  • Risk of regulatory gaps and inconsistencies
  • Risk of regulatory arbitrage
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5
Q

What is the cross sectoral approach? What are the advantages and disadvantages?

A
  • Approach on the basis of the key-elements in each financial sector.
  • Advantages:
    • Insight in parallels, overlaps, gaps, contradictions and unsubstantiated differences:
      • Different rules for financial instruments which are formally part of different sectors, but which serve similar aims and have similar features.
  • Disadvantages:
    • Not all elements are as imporant in each financial sector: eg. venues
    • The difference between different elements is not always clear:
      • Investment funds
      • Consumer credit
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6
Q

What are the three layers of financial law?

A
  • International law:
    • Basel Committee on Banking Supervision
    • IOSCO: International Organization of Securities Commissions
    • FATS: Financial Action Task Force
  • European law:
    • TFEU: four freedoms, especially services and capital: ECJ case law
    • EU directives and regulations
    • Recommendations
    • Guidelines, interpretations, Q&A’s,…
    • Codes of conduct, usages and best practises of professional organisations
  • National law
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7
Q

What are the goals of financial law?

A
  • Goals of financial law in general:
    • Market stability and integritiy
    • Protection of retail customers
  • Additional “European” goal of financial law:
    • Market integration
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8
Q

What is the market integrity and stability?

A
  • Macro rules: public interest:
    • Avoiding systemic risk
  • Systemic risk is particular to financial sector
  • In a globalised financial world, avoiding/managing systemic risk requires regulation on a supra-national level:
    • Cfr. crisis
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9
Q

What is the goal of financial law with regards to protection of retail customers?

A
  • Protection / confidence of retail customers
  • Micro rules - Private interest
  • Not particular to financial sector
  • Need for regulation increases with the complexity of goods and services
  • Consumer protection and market stability as 2 sides of a coing:
    • Public interest and private interest are hardly separable: eg. responsible lending, “run on the bank”.
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10
Q

What is the additional European goal of financial law?

A
  • Integration: harmonisation:
    • By law: directives and regulations
    • By the market: eg. SEPA
      • Easier access to European market by:
        • Financial institutions
        • Professional clients
        • Retail clients
  • Not particular to European financial law
  • Particularly important for European financial law
    • Smooth functioning of financial markets as motor for economic growth.
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11
Q

What are the 4 freedoms?

A
  • Currently art. 28 TFEU.
  • Art. 8 EEC Treaty: common market was to be estabilished by 31 december 1969 –> restrictions on free movement of goods, persons, services, services and capital should have been abolished
  • Free movement of services and freedom of estabilishment:
    • ECJ recognised direct effect quite early: Reyners (2/74)
  • Free movement of capital and payments:
    • This is to a large extent the flip side of the other freedoms.
    • For a long time, no direct effect: Casati
    • Directive and Treaty of Maastricht: direct effect - Sanz de Lera-case
  • Negative integration:
    • No impediments to free movemeent of financial services / capital and payments
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12
Q

What was the White Paper?

A
  • 1985: Completing the Internal Market:
    • Aim: removal of all barriers to trade in the EC
    • Liberalisation of the movement of capital and payments
  • Realisation of an internal market for financial services on the basis of:
    1. Minimum harmonisation
    2. Home state control
    3. Mutual recoggnition
  • First generation directives on banking and investment services
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13
Q

What are the drawbacks of the white paper?

A
  • Invenctives for supervisory shopping
  • Risk of regulatory competition resulting in a race to the bottom
  • Lack of trust in other MS legislation / supervision: much goldplating
  • Drawbacks of the legislative process:
    • Slow
    • Unable to respond to changing market condtions
    • Inclined to produce ambiguous texts, mixing broad principles with detailed technical issuesAttach Sounds
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14
Q

What is the FSAP?

A
  • 1999: Financial Services Action Plan:
    • With the introduction of the Euro: modern financial apparatus
    • New regulatory challenges
    • Five imperatives for action
  • Lisbon European Council of 24 march 2000:
    • To accelerate completion of the internal market for fincnaisl services.
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15
Q

What was the Lamfalussy report?

A
  • 2002: Lamfalussy report and legislative procedure with respect to securities regulation
    • Aim: speeding up the legislative process
    • Four level approach
    • Often max. harmonisation
  • Extended to other sectors of financial law (banking, insurance) in 2003
  • Second generation directives on banking and investment services
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16
Q

What is the EMU?

A
  • Economic and Monetary Union: 3 stages
    • 1 july 1990 - 31 december 1993: realisation of free movement of capital and payments: Maastricht Treaty - Sanz de Lera Case
    • 1 Jan 1994 - 31 dcember 1998: ECB, Stability and Growth Pact
    • 1 Jan 1999:
      • Introduction of the EURO: although notes and coins onlly since January 2002
      • Single monetary policy under the authority of the ECB
17
Q

What is the SEPA?

A
  • January 2008: launch of SEPA plan = Single European Payments Area
  • Project of the European Payments Council: EPC
  • Aims at standardising and thus facilitating electronic payments withing the SEPA:
    • Improving the efficiency and costs of cross -border cashless payments
  • Strongly supported by the European Commission:
    • Payment Services Directive: PSD
    • SEPA credit transfer: European format
    • European Debit and Credit cards
18
Q

What was the effect of the crisis on the financial law?

A
  • After the first wave of the crisis:
    • De Larosière report: report of the high level group on financial supervision in the EU
    • Reform of EU financial supervisory structure
    • Ad hoc changes to financial regulation: changes to banking directives, update deposit guarantee directive
    • Acceleration of work in progress: update consumer credit directive
    • New regulation: AIFMD, new consumer credit directive
  • Second wave of the crisis: problems with EMU in the light of the public debt crisis
19
Q

What are the aims of the Lamfalussy procedure?

A
  • Speeding up the legislative process
  • Be flexible so that legislation can be quickly adapted to the rapid pace of the technical changes and product innovation in the financial market
  • Help speedy implementation
  • Establishing a level playing field and removing any opportunity to erect regulatory barriers to competition
  • 4 level approach
20
Q

What is the level 1?

A
  • Framework principles:
    • Basic political choices that can be translated into broad but sufficiently precise framework norms
    • To be decided by normal legislative procedure
    • Usually resulting in a framework directive = level 1 directive
21
Q

What is the level 2?

A
  • Implementing measures:
    • More detailed technical measures
  • Mandate to the European Commission
  • Usually resulting in an implementing directive or regulation = level 2 directive or regulation
22
Q

What is the level 3?

A
  • Common implementing standards by the newly established level 3 committees: replaced in 2011 by the European Supeervisory Authorities
  • Resulting in soft law with high authroitiative value = level 3 measures, interpretations, recommendations, Q&A’s.
23
Q

What was the level 4?

A
  • Compliance check by the Commission, “underpinned by enhanced cooperation between MS, national regulators and the private sector
  • Resulting in enforcement measures
24
Q

What is the importance of the Level3 committees?

A
  • Securities regulation:
    • Committee of European Securities Regulators: CESR
    • 2011: replaced by the European Securities and markets Authority: ESMA
  • With respect to banking:
    • Committee of European Banking Supervisors: CEBS
    • 2011: Replaced by the Eurpean Banking Authority: EBA.
  • CEIOPS –> EIOPA.
25
Q

What is the supervision of EU financial law?

A
  • Supervision by national supervisors:
    • Home country control, mutual recognition, European passport.
    • Exception: prudential supervision of the banking sector: ECB
  • Cooperation at European level:
    • ESA’s: European Supervisory Authorities
      • EBA = European Banking Authority
      • ESMA = European Securities and Markets Authority
      • EIOPA = European Insurance and Occupational Pensions Authority
  • ESRB = European Systemic Risk Board
    • Exchange of information on systemic risk
26
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27
Q
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European Banking and Investment Services Law (3 decks)

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