the regulatory aftermath of the global financial crisis

30 Pages·2012·0.18 MB·English

Cambridge University Press
978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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THE REGULATORY AFTERMATH
OF THE GLOBAL FINANCIAL CRISIS
TheEUandtheUSrespondedtotheglobalfinancialcrisisbychanging
the rules for the functioning of financial services and markets and by
establishing new oversight bodies. With the US Dodd-Frank Act and
numerousEUregulationsanddirectivesnowinplace,thisbookprovides
a timely and thoughtful explanation of the key elements of the new
regimes in both regions, of the political processes which shaped their
content, and of their practical impact. Insights from areas such as
economics, political science and financial history elucidate the signifi-
cance of the reforms. Australia’s resilience during the financial crisis,
whichcontrastedsharplywiththesevereproblemsthatwereexperienced
in the EU and the US, is also examined. The comparison between the
performancesofthesemajoreconomiesinaperiodofsuchextremestress
tellsusmuchaboutthecomplexregulatoryandeconomicecosystemsof
whichfinancialmarketsareapart.
eilı´s ferran is Professor of Company and Securities Law at the
UniversityofCambridgeandaUniversityJMKeynesFellowinFinancial
Economics.
niamh moloney isProfessorofFinancialMarketsLawattheLondon
School of Economics and Political Science and a Fellow (Household
Finance)oftheCentreforFinancialStudies,Frankfurt.
jennifer g. hill isProfessorofCorporateLawandaDirectorofthe
Ross Parsons Centre of Commercial, Corporate and Taxation Law at
SydneyLawSchool,Australia.
john c. coffee, jr. istheAdolfA.BerleProfessorofLawatColumbia
UniversityLawSchoolandDirectorofitsCenteronCorporateGovernance.
© in this web service Cambridge University Press www.cambridge.org
Cambridge University Press
978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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INTERNATIONAL CORPORATE LAW AND FINANCIAL
MARKET REGULATION
Corporate law and financial market regulation matter. The global
financial crisis has challenged many of the fundamental concepts
underlyingcorporatelawandfinancialregulation;butcrisisandreform
has long been a feature of these fields. A burgeoning and sophisticated
scholarshipnowchallengesandcontextualizesthecontestedrelationship
between law, markets and companies, domestically and internationally.
This Series informs and leads the scholarly and policy debate by
publishing cutting-edge, timely and critical examinations of the most
pressingandimportantquestionsinthefield.
SeriesEditors
ProfessorEilı´sFerran,UniversityofCambridge
ProfessorNiamhMoloney,LondonSchoolofEconomicsandPoliticalScience
ProfessorHowellJackson,HarvardLawSchool
EditorialBoard
ProfessorMarcoBecht,
ProfessorofFinanceandEconomicsatUniversite´ Librede
BruxellesandExecutiveDirectoroftheEuropeanCorporate
GovernanceInstitute(ECGI).
ProfessorBrianCheffins,S.J.BerwinProfessorofCorporate
LawattheFacultyofLaw,UniversityofCambridge.
ProfessorPaulDavies,Allen&OveryProfessorofCorporateLawand
ProfessorialFellowofJesusCollege,UniversityofOxford.
ProfessorLucaEnriques,VisitingProfessor,HarvardLawSchool
ProfessorGuidoFerrarini,ProfessorofBusinessLawatthe
UniversityofGenoaandFellowoftheEuropeanCorporate
GovernanceInstitute(ECGI).
ProfessorJenniferHill,ProfessorofCorporateLawatSydneyLawSchool.
ProfessorKlausJ.Hopt,EmeritusScientificMember,MaxPlanck
InstituteofComparativeandInternationalPrivateLaw,Hamburg,Germany.
ProfessorHidekiKanda,ProfessorofLawattheUniversityofTokyo.
ProfessorColinMayer,PeterMooresProfessorofManagementStudiesattheSa¨ıd
BusinessSchoolandDirectoroftheOxfordFinancialResearchCentre.
JamesPalmer,PartnerofHerbertSmithFreehills,London.
ProfessorMichelTison,ProfessorattheFinancialLawInstituteofthe
UniversityofGhent,Belgium.
AndrewWhittaker,GeneralCounseltotheBoardattheUKFinancial
ServicesAuthority.
ProfessorEddyWymeersch,formerChairmanoftheCommitteeof
EuropeanSecuritiesRegulators(CESR);formerchairmanoftheIOSCO
EuropeanRegionalCommittee,andProfessorofCommercialLaw,
UniversityofGhent,Belgium.
© in this web service Cambridge University Press www.cambridge.org
Cambridge University Press
978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
Frontmatter
More information
THE REGULATORY
AFTERMATH OF THE GLOBAL
FINANCIAL CRISIS
´
EILIS FERRAN, NIAMH MOLONEY,
JENNIFER G. HILL
and
JOHN C. COFFEE, Jr.
with a foreword by
ETHIOPIS TAFARA
© in this web service Cambridge University Press www.cambridge.org
Cambridge University Press
978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
Frontmatter
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Firstpublished2012
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Theregulatoryaftermathoftheglobalfinancialcrisis/Eilı´sFerran,NiamhMoloney,
JenniferG.HillandJohnC.Coffee,Jr.
p. cm.
ISBN978-1-107-02459-5(Hardback)
1. Financialinstitutions–Lawandlegislation–UnitedStates.
2. Financialinstitutions–Lawandlegislation–EuropeanUnioncountries.
3. Financialinstitutions–Lawandlegislation–Australia.
4. Financialservicesindustry–Lawandlegislation–UnitedStates.
5. Financialservicesindustry–Lawandlegislation–EuropeanUnioncountries.
6. Financialservicesindustry–Lawandlegislation–Australia. I. Ferran,Eil´ıs.
K1066.R4352012
3460.08–dc23
2012018824
ISBN978-1-107-02459-5Hardback
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978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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CONTENTS
Foreword xi
Notes on contributors xxvii
Acknowledgements xxviii
Table of cases xxix
Table of legislation xxx
1 Crisis-driven regulatory reform: where in the world
is the EUgoing? 1
eilı´s ferran
I Introduction 1
Neverwasteseveralgoodcrises... 1
Definingthescopeofthechapterandexplainingtheapproach 6
Anoteonthechronologyoftheglobalfinancialcrisis 11
Anoteontheeuroareasovereigndebtcrisis 12
II Intergovernmentalism–thecrisesandtheMemberStates 17
Insightsfromtheory 17
Fromtheorytopractice:MemberStates’viewsonEU
financialregulationintheyearsleadinguptotheglobal
financialcrisis 23
MemberStatesandpost-crisisreforms:meetinginthemiddle? 29
Stillbattling...andevenstartingtomovefurtherapart? 36
Marketinfrastructure/shortselling 37
“Too-big-to-fail” 39
Corporategovernance 44
Financialservicessupervision 45
Evaluation 52
III Supranationalism–thecrisesandtheCommission 54
Introduction 54
TheCommissioninthepre-crisisera 55
Theimpactoftheglobalfinancialcrisis:thefirstphaseof
theresponse 57
v
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978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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vi contents
Phasetwooftheresponse:theCommission’sroleinconcretizing
thefinancialservicesreformagenda 63
Overallprocessmanagementofthelegislativeprogram 63
“Too-big-to-fail” 65
Supervision 71
Evaluation 78
IV Supranationalism–thecrisesandtheEuropeanParliament 83
Introduction 83
FindingtheParliament’simprintoncrises-relatedreforms 84
Playingawaitinggame? 85
Financialtransactionstax 86
Implicationsforthefuture 88
V Externalrelations 89
Introduction 89
Exertinginfluenceoverinternationalfinancialregulationasnew
economicpowerschallengetheestablishedorder–new
opportunitiesforEUregulatoryleadership? 92
“Speakingwithasinglevoice” 96
ExportingkeyEUregulatoryideas:issuesofsuitability 99
Theprospectsforbuildingglobalinfluencethroughamore
equaltransatlanticrelationship 100
VI Conclusion 107
2 The legacy effects of the financial crisis on regulatory
design in the EU 111
niamh moloney
I Examiningregulatorychange 111
Introduction 111
Chartinginnovationandchange 112
Themarketregulationandconsumerprotectioncase
studies 117
II Thelegacyeffectsformarketandconsumerprotection
regulation 127
Financialmarketintensityandinnovation 127
Theimplications 137
Policyinnovationandruleinnovation 140
De-intensificationandsimplificationintheEU 145
III Thelegacyimpactofthecrisisonmarketregulation 152
Are-orientationofthereformprogram? 152
TheEUmarketregulationagenda 154
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978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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contents vii
Reshapingmarketregulation 160
Reshapingtradingvenueregulation 160
Reshapingtheregulationoftradingpractices 166
Reshapingfinancialmarketdisclosure 170
Theequitymarkets 174
IV Thelegacyeffectsofthecrisisonconsumerprotection
regulation 182
Refocusingontheconsumermarkets 182
Theriseofproductintervention 186
Hasdistrustofinnovationledtoaproductiveconsumer
marketreform? 194
V Conclusion 201
3 Why did Australia fare so well in the global
financial crisis? 203
jennifer g. hill
I Introduction 203
II TheAustralianeconomyandtheimpactoftheglobalfinancial
crisisonAustralia’sfinancialmarkets 208
III Regulatorystructureandtheglobalfinancialcrisis 215
AsnapshotofAustralia’scorporateandfinancialservices
regulatorystructure 215
TheAustralian“twinpeaks”modelcomparedtoUSand
UKregulatorystructurespriortotheglobalfinancial
crisis 221
IV Regulatorycooperationintheeraoffinancialmarket
integrationandtheUS–Australianmutualrecognition
arrangement 225
V SomeAustralianfinancialpolicyandregulatoryresponses
totheglobalfinancialcrisis 232
TheAustraliangovernment’seconomicstimulusprogram 233
Emergency-stylereforms–theDepositandWholesale
FundingGuaranteeSchemeandtheRMBSInitiative 238
Thedepositguarantee 240
Thewholesalefundingguarantee 244
Theresidentialmortgage-backedsecurities(RMBS)
initiative 247
Coveredbonds 251
ASIC’sbanonshortselling 256
Executiveremunerationreforms 262
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978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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viii contents
RetailinvestorprotectionandtheFutureofFinancial
Advicereforms 270
VI WhydidAustraliafaresowellduringtheglobalfinancialcrisis? 276
ChinaandAustralia’sresourcesboom 277
TheReserveBank’smonetarypolicyandtheeconomic
stimulusprogram 281
Australia’sregulatorystructure,APRAandtheHIH
RoyalCommission 285
TheAustralianbankingsystem 289
Australia’ssuperannuationsystem 295
VII Conclusion 299
4 The political economy of Dodd-Frank: Why financial
reform tends to be frustrated and systemic risk
perpetuated 301
john c. coffee, jr.
I Introduction 301
II TheRegulatorySineCurveandstatutorycorrection 312
III SOXrevisited:thedownsizingofreform 321
Section404andinternalcontrolreports 321
ExecutiveloansandSection402 325
AttorneysaswhistleblowersandSection307 328
Anevaluation 331
IV TheDodd-FrankAct:premisesandpolicyoptions 332
Threecrediblescenarios 332
Moralhazard:“Executivecompensationcausedthe
crash” 332
Responses 334
Executivecompensationandshareholderpressure 336
Systemicriskandthe“toobigtofail”problem 342
Higherequitycapitalrequirements 344
Aprivate,industry-fundedinsurancesystem 344
Reducingriskthroughprophylacticrules 345
TheOTCderivativesmarket 349
V TheimplementationoftheDodd-FrankAct 351
Curbingexecutivecompensation:theroadnottaken 352
Proxyaccessandcorporategovernance 352
Section956 355
TheTBTFproblem 360
Resolutionauthority 361
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978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
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contents ix
TheVolckerRule 361
Contingentcapital 363
Thelegislativecounterattack 364
VI Conclusion 367
Index 373
© in this web service Cambridge University Press www.cambridge.org
Cambridge University Press
978-1-107-02459-5 - The Regulatory Aftermath of the Global Financial Crisis
Eilís Ferran, Niamh Moloney, Jennifer G. Hill and John C. Coffee
Frontmatter
More information
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