The Regulatory Environment of Cross-Border Entry in EC Retail Financial Services

Abstract

Financial markets in the EC were for a long time separated by restrictions on cross-border capital movements as well as rigid regulations which frequently had the effect of protecting the domestic industry from foreign competition. Regulatory entry barriers were erected with the legitimation of protecting depositors or policyholders and preserving monetary and financial stability. This linkage between entry barriers and regulatory objectives was recognised in the Cecchini report which states that:¹

A common feature of the financial … service branches is that the regulatory functions of government, while aiming primarily at prudential or safety objectives, also often tend to limit entry into the market as a side effect … the general objective of European market integration … is, therefore, to separate out far more clearly the setting and supervision of prudential and safety standards from the issue of market entry