Regulating and Supervising Investment Services in the European Union

383 Pages·2003·2.408 MB·English

by  Yannis V. Avgerinos (auth.)

Regulating and Supervising Investment Services
in the European Union
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Regulating and Supervising
Investment Services in the
European Union
Yannis V.Avgerinos
© Yannis V.Avgerinos 2003
Softcover reprint of the hardcover 1st edition 2003 978-1-4039-1204-6
All rights reserved.No reproduction,copy or transmission of this
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the author of this work in accordance with the Copyright,
Designs and Patents Act 1988.
First published 2003 by
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PALGRAVE MACMILLAN is the global academic imprint of the Palgrave
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ISBN 978-1-349-51091-7 I SBN 978-0-230-28687-0 (eBook)
DOI 10.1057/9780230286870
This book is printed on paper suitable for recycling and made from fully
managed and sustained forest sources.
A catalogue record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Avgerinos,Yannis V.,1975–
Regulating and supervising investment services in the European Union /
Yannis V.Avgerinos.
p.cm.
Includes bibliographical references and index.
1.Financial services industry–Law and legislation–European Union countries.
2.Banking law–European Union countries.3.Banks and banking–European Union
countries–State supervision.I.Title.
KJE2188.A98 2003
332.1(cid:2)094–dc21 2002193092
10 9 8 7 6 5 4 3 2 1
12 11 10 09 08 07 06 05 04 03
To my parents,Christine and Vassili,
whom I simply adore
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Table of Contents
Foreword xiv
Preface xvii
Table of Acronyms xix
Table of Cases xxii
Prologue 1
A Subject and focus 1
B The background 1
C Formulation of the problematique 3
D The response 7
1 Three steps for effective supervision and two criteria
for EU action 7
2 The need for a pan-European Securities Regulator 8
3 Putting an end to sectoral supervision? 9
E Approach and structure of the book 9
Part I Why Supervise? 13
1 The Objectives of Financial Supervision 15
A Introduction 15
B Theoretical underpinning 16
C The objectives of supervision 18
1 Financial stability 18
2 Consumer protection 20
3 Competition promotion 22
D Key principles of financial supervision 23
E Concluding remarks 24
Part II How to Supervise? 27
2 The Single European Market in
Investment and Financial Services 29
A Introduction 29
B Global economic cooperation 30
C European economic integration 30
D European market integration and liberalisation 32
vii
viii Table of Contents
1 The roots of market integration 32
2 Development of the Internal Market programme 33
2.1 The White Paper 33
2.2 The three modules of the Internal Market strategy 35
2.2.1 Minimum harmonisation 35
2.2.2 Mutual recognition 36
2.2.3 Home country control 36
2.3 The Single European Act (SEA) 37
3 The single financial market and beyond 38
3.1 Financial services liberalisation 38
3.2 Investment services secondary legislation 40
3.2.1 The Investment Services Directive (ISD) 40
3.2.2 The Capital Adequacy Directive (CAD) 43
4 The Financial Services Action Plan (FSAP) 45
5 Future policy developments 46
E Concluding remarks 48
3 The Home Country Control Principle 50
A Introduction 50
B Conceptual background 50
C The EU paradigm 52
1 Supervisory concerns 52
2 The three-tier lociof financial supervision 53
D The origin and legal status of the principle 55
1 Secondary law and the international regime 55
2 The ECJ and overview of its case law 56
3 Application of EU secondary and case law 62
E Home country control and investment services 63
1 Supervisory responsibilities of the home Member State 63
1.1 Authorisation – conditions for taking up business 63
1.1.1 Capital requirements 64
1.1.2 Competence of directors 64
1.1.3 Operations programme 65
1.1.3.1 Type of business 65
1.1.3.2 Organisational structure 66
1.1.4 Identity of shareholders 67
1.2 Prudential supervision 68
1.2.1 What is prudential supervision? 68
1.2.2 Continuing information requirements 68
1.2.3 Information regarding qualifying holdings 69
1.2.4 Drawing up of prudential rules 70
1.3 Notification requirements 71
1.3.1 Establishing a branch 72
1.3.2 Establishing cross-border services 73
Table of Contents ix
1.4 Drawing up of list of regulated markets 74
2 Supervisory responsibilities of the host Member State 75
2.1 Drawing up of Conduct of Business Rules (CBR) 75
2.1.1 CBR as a regulatory issue 76
2.1.2 Unlimited CBR? 76
2.2 Access to regulated markets 77
2.3 Compensation schemes 78
2.4 Direct intervention by the host Member State 79
3 Cooperation 80
F Concluding remarks 80
4 The Institutional Design 82
A Introduction 82
B International non-legislative initiatives 83
1 Worldwide supervisory cooperation 83
2 The Group of Ten and the Basel Committee on Banking
Supervision 84
3 The International Association of Insurance Supervisors (IAIS) 86
4 The International Organisation of Securities
Commissions (IOSCO) 87
5 The Joint Forum and the Financial Stability Forum (FSF) 89
6 Observations on the development and work of
international fora 90
C The EU policy-making on securities regulation and supervision 91
1 The European Commission 93
2 Member States’ securities commissions 94
3 The Lamfalussy Committees and the Forum of
European Securities Commissions 95
3.1 The European Securities Committee (ESC) 95
3.2 The Forum of European Securities Commissions
(FESCO) 96
3.3 The Committee of European Securities Regulators
(CESR) 97
D Constitutional concerns about the institutional design 98
E Concluding remarks 100
5 Assessing Home Country Control and Mutual Recognition 102
A Introduction 102
B Advantages and the importance of the principles 103
1 Subsidiarity 104
2 Regulatory competition 105
3 Simplification and experimentation 108
C Disadvantages and problems of application: The antilog 108