European financial market regulation in the wake of the financial crisis: a functional approach
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European financial market regulation in the wake of the financial crisis: a functional approach Christoph H. Seibt • Simon Schwarz
Published online: 13 July 2011 China-EU School of Law 2011
Abstract Speech at the CESL Conference 2010—The article contains a tour d’horizon through the changing regulatory landscape which shows that practically any part of the value chain of capital markets is subject or will be subject to a certain type of (new) state regulation. Thus, not only in theory, but also in practice, the ‘role of law’ in financial markets is of high(est) and increasing importance. In particular, the financial crisis has triggered a veritable flood of reform acts and legislative proposals rendering it extremely difficult for all stakeholders of financial markets legislation to keep pace with the latest developments. Against this background, the first section of the paper explores the theoretical und economic foundations of capital market regulation in general. The second section of the paper provides an outline of the recent legislative measures taken by the European Union that aim at fostering and regaining confidence in and efficiency of capital markets. Keywords Financial market regulation Financial crises Capital markets law Economic analysis of law Banking regulation Securities markets regulation
This paper represents the written manuscript of a lecture held in the context of the CESL 2010 Academic Conference on 24 October 2010 in Beijing and states the law as it stood to the authors at that date. C. H. Seibt (&) S. Schwarz Freshfields Bruckhaus Deringer LLP, Freshfields Haus, Hohe Bleichen 7, 20354 Hamburg, Germany e-mail: [email protected] S. Schwarz e-mail: [email protected] C. H. Seibt Bucerius Law School, Hamburg, Germany
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1 Introduction The latest global financial crisis triggered regulatory and ad hoc state interventions in the financial industry to an extent that would not have been imaginable before the crises. Such interventions involved, for instance, the strict regulation or prohibition of certain (formerly common) trading practices, various different types of government bail-outs as regards financial institutions (e.g. state guarantees, purchase of ‘poisoned’ securities) and even outright nationalization of banks of systemic importance on the basis of new emergency legislation.1 The recent financial turmoil has shifted both the governmental and public focus from a neoclassical, market-based, self-regulatory and kind of laissez-faire type approach of financial market regulation to a more much state-oriented concept of compulsory legal rules narrowing down the leeway traditionally granted to the market participants. This commonly shared change of mind is probably due to (1) the tremendous financial losses that have been generated in the financial industry and that, finally, also affected the ‘real’ economy entailing costs to be borne by the whole society (social costs2), (2) the overwhelming need and lack of an alterna
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