Banking laws of member states of the EU are constantly reviewed by the laws and policies of the EU directed towards a unified market for financial services in the areas of banking, insurance and investment. Beginning with the First Banking Directive of 1977 which allowed banks to set up branches in member states, the Second Banking Directive 1989 provided for minimum capital requirements and procedures for home country regulators to control branches of financial institutions in other Member states. An EU 1985 White Paper proposed a single market in financial services effective 1992, and suggested harmonisation of key standards, movement of capital; joint coordination activities by regulatory agencies; home country control of businesses where the head office is located. The Banking Consolidation Directive covers credit and financial institutions just as the European Passport provides for services that could be done by a business concern in other states upon an approval by the home country authority. Banks therefore could operate in any part of the EU without approval of regulators in each country with the European passport or single licence concept upon a licence or authorisation by home country. The problem with a single approval or authorisation is that it may be difficult for the home state to monitor compliance as standards cannot be uniform throughout the EU. Though a single market principle demands that businesses should be able to operate anywhere in the community without hurdles or barriers, standards must be maintained especially in banking issues as each state’s case may specifically present peculiar needs. Capital adequacy directive for banks and investment firms was to ensure the liquidity and viabili... ... middle of paper ... ...tionalistic inclinations in some member states due to lack of adequate monitoring and reports by aggrieved parties. It is expected that the EUwould be more vocal in ensuring that its rules are enforced and complied with by the Member states. Works Cited E.P. Ellinger, E. Lomnicka, R.J.A Hooley, Ellinger’s Modern Banking Law, Fourth Edition, OUP, Oxford, 2006, page 53. Relying on the European Court of Justice interpretation on movement of goods in Cassis de Dijon Case 120/78 (1979) ECR 649 and Coditel Case 262/81[1982] ECR 3381 Directive 2000/12/EC E.P. Ellinger, E. Lomnicka, R.J.A Hooley, Ellinger’s Modern Banking Law at page 56 Capital Adequacy Directive 93/6 [1993] OJ LI41/1 Directive 94/19EEC[1994] OJ LI 35/5 http://www.finance.yahoo.com/news/Why-the Irish-Crisis-Going-usnews-4028366968.html?x=0 http://www.euromove.org.uk
European Commission. Economic and monetary union and the euro. Publications. Luxembourg: Publication Office of the European Union, 2012. Document.
In addition, corruption existed in Euro alliance. The transparency of regulation is doubtful. As I mentioned before, rules breaking had been a consistent issues, but no one was penalized for its offence. Poor monitoring of Euro regulators connived the moral hazard and free-riding problem.
The pioneering judgement in Keck1 differentiated product requirements and selling arrangements. Justified by the effect on market access, the latter was held to be outside of the ambit of Article 34 TFEU, prohibiting all measures having equivalent effect to quantitative restrictions on imports2 between Member States. This was widely interpreted in Procureur du Roi v Dassonville3 to preclude the totality of trading rules implemented by Member States that are capable of either directly, indirectly, actually or potentially, hindering intra-Community trade, as measures having equivalent effect.4 In Keck, the European Court of Justice (ECJ) aimed to clarify case law5 after Article 34 was increasingly invoked by merchants challenging national trade regulations insofar as the impact on the free movement of goods was negligible.6 However, it received much criticism for its apparent contradiction of the application of EU laws of free movement of goods, most notably the judgements in Dassonville and ‘Cassis de Dijon,’7 which followed the Treaty’s objective of a single market. “The most authoritative assault ever mounted on the reasoning in that judgement,”8 Advocate General Jacobs’ (AGJ) criticism of Keck in Leclerc-Siplec 9, will be examined throughout in accordance with the differing theories concerning the approach of Article 34.
January 1, 1999 marked the beginning of the euro as an accepted currency in eleven European countries. Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal, and Spain all adopted this single currency, becoming subdivisions of a common monetary policy. On this date, the exchange rates of each of the participating countries were set, and the euro was officially recognized as the legal currency. The push towards the development of a common currency began in 1957, when the Treaty of Rome stated a common European market as an objective, hoping that “an ever closer union among the peoples of Europe” would inevitably occur. The approval of the Single European Act in 1986 symbolized and cleared the way for accelerated European integration and the completion of a single European market. Consequently, European governments and industry began to place greater emphasis on the competitiveness of European industry and on the reduction of barriers within Europe that hindered industry’s global economic competitiveness. The European Union went a step farther in 1992 in the Treaty of European Union, creating the Economic and Monetary Union (EMU).
To answer this question I will firstly explain how EU law became incorporated within the member states I will then explain the various types of EU legislation's in circulation. This is important to define as the various types of methods will involve different enforcement procedures. Finally I will explain how EU law is enforced and the ways EU law will effect the member state and individual businesses. I will summarise my findings at the end of the essay, this will give details of all the key ideas I have ut across.
The UK’s financial sector consists of two roles in the EU. Firstly, as a core for wholesale banking actions conducted by major European banks, and also a key port of entry for non-EU investment entering the Single Market (Miethe, J, & Pothier, D, 2016), If future negotiations in regards to Brexit lead to British financial institutions losing their financial passport rights, both of these roles risk being significantly reduced. The major concern within the financial services is pass-porting, and if the UK will be able to access the EU financial market.
The global financial crisis hit banks’ regulation at its core. As significant portion of this crisis’ responsibility has been attributed to the lack of effective banking oversight, there has been immense pressure on the next Basel agreement to tackle such issues in order to avoid future crises, or at least decrease their severity. In essence, the Basel accords mainly intend to gauge the level of capital required to protect banks against risks related to their assets. As a result, the latest accord, Basel III, has substantially increased the capital requirements of banks and introduced other features as an effort to increase the soundness of the banking system. The banking industry, however, has proclaimed that it would promote mainly negative outcomes throughout the global economy due to higher required capital ‘set aside’. In light of this contentious dynamic, this essay strives to give a balanced overview of the issues at stake, and to critically analyse the arguments advanced in the article attached to this document. As a result, it highlights Basel III’s potential positive and negative effects when fully implemented, as well as several credit rating agencies’ shortcomings, which were mainly exposed due to the financial crisis. Finally, it concludes by arguing that the article lacks essential information, and the banking industry’s reactions signal an attempt by a powerful industry to maintain its exorbitant privileges.
There is a vast amount of literature available on the additional procyclicality of regulatory capital charges in Pillar 1 of Basel II. In this section, we shall briefly visit this literature and see if any conclusions can be drawn from this, before proceeding to the conclusion and mitigation of these procyclical effects. The majority of the literature, as expected, focuses primarily on the IRB approach, as this aspect of Basel II has drawn the most criticism from financial practitioners and academics alike. The greater part of this literature has found that there is an overwhelmingly substantial rise in procyclicality of minimum regulatory capital charges originating from the IRB approach. Gordy and Howells found that under the IRB approach, volatility in the capital charge, relative to the mean, is between 0.1 to 0.26 (Gordy & Howells, 2004). This follows another study by Kashyap and Stein, which shows that capital charges rose by 70-90% during the years of 1998 to 2002 dependant of the model used to calculate PD’s (Goodhart & Taylor, 2004).
...ence of Capital Measurement and Capital Standards’, Basle Committee on Banking Supervision, vol.1, no.1, p1-28.
Howells, Peter., Bain, Keith 2000, Financial Markets and Institutions, 3rd edn, Henry King Ltd., Great Britain.
Since the financial crisis the banking industry has gone through unprecedented structural and regulatory reform aimed at reshaping and stabilising the banking systems. Although some of these changes were both necessary and beneficial to we have reached a point of overregulation is damaging the sector.
What is the net contribution of the Basel Process to the governance of global finance? The goal of this paper is to describe, analyze, and evaluate the costs and benefits of the Basel Capital Adequacy Accords through the comparison of intended consequences, namely the stability of the global banking system, and unintended consequences, namely financial risks.
DeYoung, Robert, Evans, Paul, Lam, Pok sang and West, Kenneth. Journal of Money Credit and Banking Ranking: 2010: Business, Finance: 22 / 74; Economics: 88 / 304
Foreign banks require healthy private sector that can earn reasonable rate of return in a stable economic environment, that is, when the private sector is healthy, this is a good indicator for the foreign investor that the economy is, stable, thriving and can be a good investment opportunity. Government is too involved in the regulatory approvals .None is even left in the hands of the private sector through organised bodies as it is the case in the UK through the Financial Service Authority (FSA). The FSA regulates both prudential aspect and conducts of business. It is funded by industry levy and governs by a board of overseers. This board of overseers are mostly people in the financial sector not necessarily in government Llewellyn (2000).
A variety of groups are concerned in bank profitability for various reasons. The bank shareholders would want to know if the value of their investments is high or low. The investors also use current and past performance to predict future price of the banks’ shares traded on the stock exchanged. The management of the bank as trustee of the shareholders is evaluated and compensated on the basis of how well their decisions and planning have contributed to growth in assets and profits of their banks. Employees of bank also are concerned with profits, since their salaries and promotions are frequently tied to the profitability performance of their banks. Depositors use bank performance and profitability as indicators of security for their deposits in the banks. Finally, business community and general public are concerned about their banks’ performance to the extent that their economic prosperity is linked to the success or failure of their banks.