Abstract
The federalisation processes of US and EU financial supervision have both originally been founded on similar—although not identical—legal bases: regulating interstate commerce in the US (US Const., Art. 1, Sect. 8, Cl. 3) and establishing or ensuring the functioning of the internal market in the EU (Art. 114 TFEU).
The complexity of the US system, comprised of a patchwork of state and federal authorities mainly established in the first part of the twentieth century, is the product of both major economic failures and a specific political culture. The progressive federalisation of financial supervision within the EU is the result of a well-thought-out project of integration of the internal market. The last financial crisis and the recognition of the overarching objective of financial stability have nonetheless led to significant evolutions, more particularly through the establishment of the three European supervisory authorities (ESAs). Moreover, and perhaps more importantly, the latest initiatives related to the establishment of an EU Banking Union have profoundly transformed the underpinnings of financial supervision in the EU since it is, from this point forward, partially linked with the Economic and Monetary Union (EMU) process.
Within this framework, the purpose of this contribution is to explore how political and legal differences between the EU and US systems have shaped and influenced the structures and institutional aspects of supervision on both parts of the Atlantic without necessarily leading to significant divergences as to the contents of financial regulation. More specifically, a comparative study of these two systems highlights significant differences as to the interplay between federal and State supervisors.
R. Bismuth is Professor of Public Law at University of Poitiers.
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Notes
- 1.
Draghi (2013).
- 2.
The Preamble of the US Constitution provides, inter alia: “We the people of the United States, in order to form a more perfect union, […], do ordain and establish this Constitution for the United States of America”.
- 3.
See also, TEU, Preamble, para. 13.
- 4.
Draghi (2013).
- 5.
While all EU legislation must cite in its preamble its legal basis within the treaties, in the US, there is “no formal obligation to recite a ‘basis’ in the constitution for a given federal legislative measure” Bermann (1997, p. 32).
- 6.
“The Congress shall have power […] [t]o regulate commerce with foreign nations, and among the several states […]”.
- 7.
“The European Parliament and the Council shall […] adopt the measures for the approximation of the provisions laid down by law, regulation or administrative action in Member States which have as their object the establishment and functioning of the internal market” (Art. 114.1 TFEU).
- 8.
Draghi (2013) (referring to “the political implications of a single market”).
- 9.
- 10.
- 11.
On this issue, see Beaud (2007), p. 91 et seq.
- 12.
- 13.
Broschek (2013), p. 97 (“federalization basically can be conceived as a contingent outcome within the overarching process of political structuring that establishes institutionalized authority relationships between territorial power holders”).
- 14.
Supreme Court of Canada, Reference re Securities Act, 2011 SCC 66, [2011] 3 SCR 837.
- 15.
Besides, the Canadian Supreme Court mentioned in its opinion “a fundamental principle of federalism that both federal and provincial powers must be respected, and one power may not be used in a manner that effectively eviscerates another” (Id., para. 7). See also, paras. 54 et seq.
- 16.
Donahue and Pollack (2001), p. 85 (noting that “[t]he civil war and Reconstruction saw a marked shift of authority away from the States and toward the federal government. Prosecuting the war itself accelerated the growth of Washington’s power”).
- 17.
See below note 31 and accompanying text.
- 18.
Andenas and Chiu (2013), p. 335 et seq.
- 19.
Council Regulation 1024/2013 conferring specific tasks on the European Central Bank concerning policies relating to the prudential supervision of credit institutions, O.J. L 287/63 (2013).
- 20.
Paul v. Virginia, 75 U.S. 168 (1868).
- 21.
United States v. South Eastern Underwriters Association, 322 U.S. 533 (1944); Polish National Alliance v. National Labor Relations Board (NLRB), 322 U.S. 643 (1944).
- 22.
For an overview, see Macey and Miller (1993).
- 23.
Randall (1999), p. 630.
- 24.
- 25.
Dodd-Franck Act, Section 313(c)(1)(A).
- 26.
Brown (2013), p. 560 et seq. (pointing out that state insurance regulations lack uniformity, are sometimes duplicative, time consuming as well as expensive, and contain regulatory gaps allowing regulatory arbitrage).
- 27.
FESCO, The creation of the Forum of European Securities Commissions (FESCO), Press Release, FD1047, 9 Dec 1997. More generally, see Demarigny (2000).
- 28.
Id. See, for instance, FESCO, Signature of an European Memorandum of Understanding on the surveillance of securities activities and creation of FESCOPOL, Press Release, 99-008, 1 Feb 1999.
- 29.
See for instance, FESCO, Implementation of Article 11 of the ISD: Categorisation of investors for the purpose of Conduct of Business Rules, 00-FESCO-A, 15 Mar 2000.
- 30.
Thieffry (2001), p. 219 note 33.
- 31.
Final report of the Committee of wise men on the regulation of European securities markets, 15 Feb 2001, http://ec.europa.eu/finance/securities/docs/lamfalussy/wisemen/final-report-wise-men_en.pdf. Accessed 8 Sep 2015.
- 32.
Art. 1 of Commission Decision 2001/527/EC establishing the Committee of European Securities Regulators, O.J. L 191/43 (2001).
- 33.
Provincial/Territorial Memorandum of Understanding Regarding Securities Regulation, 2004, http://www.securitiescanada.org/2004_0930_mou_english.pdf. Accessed 8 Sep 2015.
- 34.
Ibid., Art. 5 (“Under mutual recognition, participating jurisdictions would recognize that a market participant who complies with, files documents under and/or receives approvals respecting market access requirements of the primary jurisdiction, is deemed to be in compliance with or exempt from the market access compliance, document filing and/or approval requirements of its host jurisdiction(s)”).
- 35.
Supreme Court of Canada, Reference re Securities Act, Factum of the Attorney General of Canada, File No. 33718, para. 121.
- 36.
Art. 91(2) of the 1867 Constitution Act.
- 37.
Supreme Court of Canada, above note 14, para. 80.
- 38.
Id., para. 121.
- 39.
However, it must be noted that the “one voice” doctrine is still highly debated. See Moore (2014).
- 40.
See above notes 25 and 26 and accompanying text.
- 41.
Dodd-Franck Act, Sect. 313(c)(1)(E).
- 42.
Factum of the Attorney General of Canada, above note 35, para. 118.
- 43.
Ibid.
- 44.
Supreme Court of Canada, above note 14, para. 95.
- 45.
Id., paras. 13, 18.
- 46.
On this issue, see Castellarin (2014), p. 197 et seq.
- 47.
Regulation 1095/2010 establishing a European Supervisory Authority (European Securities and Markets Authority), O.J. L 331/84 (2010).
- 48.
Id.
- 49.
IOSCO By-Laws, Art. 30 (stipulating that “Associate members may attend and speak at meetings of the Presidents Committee”).
- 50.
Factum of the Attorney General of Canada, above note 35, para. 98.
- 51.
Supreme Court of Canada, above note 14, para. 114.
- 52.
Id., para. 115.
- 53.
Id., paras. 114, 117.
- 54.
See, above notes 20–22 (and accompanying text).
- 55.
Securities Exchange Act, Title I, Sect. 2. More precisely, the Act refers to transactions in securities that “(a) […] are located and/or are effected by means of the mails and instrumentalities of interstate commerce; (b) constitute an important part of the current of interstate commerce; (c) involve in large part the securities of issuers engaged in interstate commerce; (d) involve the use of credit, directly affect the financing of trade, industry, and transportation in interstate commerce, and directly affect and influence the volume of interstate commerce” (Securities Exchange Act of 1934, Title I, Sect. 2(1)).
- 56.
Commodity Exchange Act, Sect. 2(a)(1)(A).
- 57.
- 58.
It is noteworthy to mention that the process of approximation of laws is not fully transposable in US law under the commerce clause system since “federal commerce legislation cannot require state legislatures to adopt ‘harmonized’ state laws” (Schütze 2014, p. 232) (referring to New York v. United States, 505 U.S. 144 (1992)).
- 59.
On this issue, see Van Cleynenbreugel (2014), p. 104 et seq.
- 60.
CJEU, 2 May 2006, United Kingdom v Parliament and Council, C-217/04, I-3789, para. 45.
- 61.
Id.
- 62.
Id., para 11. See also, CJEU, 6 Dec 2005, United Kingdom v Parliament and Council, C-66/04, I-10553, para. 18.
- 63.
Final Report of the Committee of Wise Men on the Regulation of European Securities Markets, above note 31.
- 64.
Commission Decision 2001/528/EC establishing the European Securities Committee, O.J. L 191/45 (2001).
- 65.
Commission Decision 2004/10/EC establishing the European Banking Committee, O.J. L 3/36 (2004).
- 66.
Commission Decision 2004/9/EC establishing the European Insurance and Occupational Pensions Committee, O.J. L 3/34 (2004).
- 67.
Report of the High-Level Group on Financial Supervision in the EU Chaired by Jacques de Larosière, Brussels, 25 Feb 2009, p. 42 et seq., http://ec.europa.eu/finance/general-policy/docs/de_larosiere_report_en.pdf. Accessed 8 Sep 2015.
- 68.
Andenas and Chiu (2013), p. 339 et seq.
- 69.
See, Regulations 1093/2010, 1094/2010 and 1095/2010 of 24 November 2010 [establishing a European Banking Authority, a European Insurance and Occupational Pensions Authority and a European Securities and Markets Authority], O.J. L 331/12, L 331/48 and L 331/84 (2010).
- 70.
Tasks listed in Art. 8 of Regulations 1093/2010, 1094/2010 and 1095/2010 (above note 69).
- 71.
Andenas and Chiu (2013), p. 339.
- 72.
See above note 69.
- 73.
See above note 69.
- 74.
See, Opinion of Advocate General Jääskinen of 12 September 2013 in Case C-270/12, United Kingdom v Parliament and Council, paras. 27–34.
- 75.
Regulation 513/2011 of 11 May 2011 Amending Regulation 1060/2009 on Credit Rating Agencies, O.J. L 145/30 (2011).
- 76.
CJEU, 22 January 2014, United Kingdom v Parliament and Council, C-270/12, para. 115.
- 77.
Id. See also, paras. 97–119.
- 78.
Lo Schiavo (2013), p. 300.
- 79.
See above note 69.
- 80.
See Bismuth (2011), pp. 152–153.
- 81.
Tuori and Tuori (2014), p. 85 et seq.
- 82.
Treaty establishing the European Stability Mechanism, 2 Feb 2012.
- 83.
Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, 2 March 2012.
- 84.
Euro Area Summit Statement, D/12/7, Brussels, 29 Jun 2012.
- 85.
For a brilliant overview of the economic and political underpinnings of the Banking Union, see Geeroms and Karbownik (2014).
- 86.
- 87.
- 88.
Art. 2(1) of Regulation 1024/2013 (above note 19), Art. 4(1) of Regulation 806/2014 establishing uniform rules and a uniform procedure for the resolution of credit institutions and certain investment firms in the framework of a Single Resolution Mechanism and a Single Resolution Fund, O.J. L 225/1 (2014).
- 89.
Van Rompuy H, Towards a genuine economic and monetary union (in close collaboration with Barroso J M, Juncker J-C, Draghi M) 5 Dec 2012, http://www.consilium.europa.eu/en/workarea/downloadAsset.aspx?id=17415. Accessed 8 Sep 2015. See also Draghi (2013) (pointing out that the Banking Union “is a consequence of the monetary union”).
- 90.
Art. 127(6) TFEU provides: “[t]he Council, acting by means of regulations in accordance with a special legislative procedure, may unanimously, and after consulting the European Parliament and the European Central Bank, confer specific tasks upon the European Central Bank concerning policies relating to the prudential supervision of credit institutions and other financial institutions with the exception of insurance undertakings”. For Art. 114.1 TFEU, see above note 7.
- 91.
European Commission, A Roadmap Towards the Banking Union. Communication from the Commission to the European Parliament and the Council. COM(2012)510, 12 Sep 2010, p. 4.
- 92.
Id.
- 93.
HM Government, Review of the Balance of Competences between the United Kingdom and the European Union—Economic and Monetary Policy, Summer 2014, p. 108.
- 94.
Id., p. 109.
- 95.
HM Government, Review of the Balance of Competences between the United Kingdom and the European Union—Economic and Monetary Policy, December 2014, p. 47 (pointing out the following measures of protection that have been adopted: prohibition of discrimination by the ECB; requirement by the ECB to enter into a memorandum of understanding with supervisory authorities of non-participating Member States; voting safeguards in the EBA to address the risk that Banking Union members vote as a bloc; and a requirement for EBA members to strive for consensus).
- 96.
Supreme Court of Canada, above note 14, para. 123.
- 97.
See, generally, ECB, Guide to Banking Supervision, November 2014, https://www.ecb.europa.eu/pub/pdf/other/ssmguidebankingsupervision201411.en.pdf. Accessed 8 Sep 2015.
- 98.
See above note 57 and accompanying text.
- 99.
IMF, United States—Publication of Financial Sector Assessment Program Documentation—Financial System Stability Assessment, IMF Country Report No. 10/247, July 2010 (noting that “[th]e complexity of the US supervisory system and the diffusion of powers across agencies undermined its efficiency, effectiveness, transparency, and accountability” (p. 7, para. 9) and that “the complex web of multiple federal and state authorities as having contributed to regulatory gaps and overlaps, as well as weaknesses in supervisory accountability” (p. 33, para. 54)). IMF, United States—Financial Sector Assessment Program—Detailed Assessment of Observance of the Basel Core Principles for Effective Banking Supervision, IMF Country Report No. 15/89 (“pointing out that “[t]he dual banking structure does pose a challenge for international cooperation, and state banking agencies with Foreign Banking Organization (FBO) presence do not always inform or coordinate enforcement actions with home supervisors” (p. 6, para. 7)). See also Felsenfeld and Glass (2011), p. 45 et seq. and Singh (2007), p. 32 et seq.
- 100.
It must be reminded that in the US banking system, State banks are subject to the supervision of a state supervisor and at least one federal authority (the Federal Reserve and/or the FDIC) (See above note 57 and accompanying text).
- 101.
Draghi (2013).
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Bismuth, R. (2016). The Federalisation of Financial Supervision in the US and the EU: A Historical-Comparative Perspective. In: Andenas, M., Deipenbrock, G. (eds) Regulating and Supervising European Financial Markets. Springer, Cham. https://doi.org/10.1007/978-3-319-32174-5_10
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