Integration of EU financial markets supervision: Harmonisation or unification?
| DOI | https://doi.org/10.1108/13581980410810669 |
| Pages | 36-44 |
| Date | 01 March 2004 |
| Published date | 01 March 2004 |
| Author | Andreas Grünbichler,Patrick Darlap |
| Subject Matter | Accounting & finance |
Integration of EU financial markets
supervision: Harmonisation or unification?
Andreas Gru
¨nbichler and Patrick Darlap
Received: 29th August, 2003
Financial Market Authority, Praterstrasse 23, 1020 Vienna, Austria; tel: +43 24959 6000;
fax: +43 24959 6099; e-mail: andreas.grunbichler@fma.gv.at
Andreas Gru
¨nbichler is Executive Director
of the Austrian Financial Market Authority
(FMA). Before, he co-chaired the Swiss
Institute of Banking and Finance and held
an executive position in the banking indus-
try. He is Professor of Finance at the Uni-
versity of St. Gallen.
Patrick Darlap is head of the FMA’s Inte-
grated Financial Markets division. He is an
economist and previously worked in the
fields of economic policy and regulatory
reform in the Austrian Ministry for Eco-
nomic Affairs and Labour.
ABSTRACT
KEYWORDS: EU financial markets, regula-
tion, supervision, financial stability
The paper highlights what are currently the
most relevant aspects in the debate surrounding
the possible reform in the institutional setup of
financial markets regulation and supervision,
not least about the future role of Central Banks.
As a preliminary question, the definition of
financial stability is addressed. Then, the
importance of stability for the economy and the
specific role of regulators and supervisors and
possible regulatory failure are discussed. On this
basis, a possible evolving design for regulation
and supervision on a national and a European
level has to be checked against optimality,
taking into account the different objectives of
state intervention into the market. Finally the
state of play in the institutional reform of Eur-
opean financial market legislation is described.
INTRODUCTION
The foremost reason for state intervention
in financial markets is the positive external
effect of a stable financial system on eco-
nomic development and sustained prosper-
ity. The notion of financial stability has,
however, changed over the last decades,
following the abolition of the Bretton
Woods System. This new meaning has
achieved increasing importance over the
past years for the arguments concerning an
optimal design of regulatory and supervi-
sory infrastructure in this field.
For the time being, there is no single
definition of financial stability. Following a
recent suggestion by Issing,
1
a distinction
can be made between ‘systems approach’
definitions and those related to the volati-
lity of directly observable financial vari-
ables. Crockett
2
adheres to the first kind,
defining financial stability as the unim-
paired capacity of financial institutions and
markets to efficiently mobilise savings, pro-
vide liquidity and allocate investment. But,
for the sake of an operationally-usable con-
cept, this convincing kind of definition is
often replaced by the operational observa-
tion of the absence of banking crises, price
stability, interest rate smoothness or the
like. As a consequence of these different
possible definitions, the attribution of regu-
Page 36
Journal of Financial Regulation and Compliance Volume 12 Number 1
Journal of Financial Regulation
and Compliance, Vol. 12, No. 1,
2004, pp. 36–44
#Henry Stewart Publications,
1358–1988
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