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Article

The ECB’s Independence and the Principle of Separation

Journal European Journal of Law Reform, Issue Online first 2020
Keywords ECB, Banking Supervision, Banking Supervision Centralization, Prudential Supervision, European Union, EU Law, Banking Union, Central Banking Independence, SSMR, SSMR
Authors Pamela Nika
AbstractAuthor's information

    This article addresses the question of whether the European Central Bank’s (ECB’s) involvement in banking supervision is compatible with its independent status as provided by the European Union’s (EU’s) primary law, specifically with reference to the principle of separation between the ECB’s monetary policy and supervisory powers. It is found that the Single Supervisory Mechanism (SSM) Regulation provides the ECB with a set of prerequisites in pursuit of its supervisory objectives under a high level of independence. However, the article argues that the current EU regulatory framework poses risks to the overall independence of the ECB. In particular, the principle of separation, as one of the mechanisms aimed at safeguarding the ECB’s independence, is not fully achieved. In addition, the boundaries and application of macro-prudential operation of the ECB in both the SSM and European Systemic Risk Board (ESRB) remain blurry and uncertain. The article concludes by suggesting that the only way to safeguard the independence of the ECB is by carefully revising the ECB’s competencies, which may require treaty amendment.


Pamela Nika
Dr Pamela Nika is a lecturer in Corporate and Finance Law at Brunel University London.
Article

Access_open The Effectiveness Paradigm in Financial Legislation – Is Effectiveness Measurable?

Journal Erasmus Law Review, Issue 2 2020
Keywords effectiveness, effectiveness measurement methodologies, financial legislation, legislative objective, product approval governance
Authors Jeroen Koomans
AbstractAuthor's information

    How can you determine if financial legislation is effective? This article seeks to identify three characteristics that make up the basis for an effectiveness review, being the determination what the legislative objective is, who is it aimed at and what approach is taken to achieve this objective. Determining the legislative objective may prove to be a challenging undertaking, and the uncertainties that come with that affect the other two characteristics as well. And even if a clear legislative objective can be established, how can you be sure that its achievement was in fact attributable to the legislation under review? What do you compare your results to absent a baseline measurement and how can the vast number of variables that affect the effectiveness of the legislation under review be accounted for, if at all? Is effectiveness in financial legislation at all measurable and, when measured, what is its value in practice?


Jeroen Koomans
Jeroen Koomans is affiliated to the University of Amsterdam FEB Academy for Banking and Insurance and employed by ABN AMRO Bank N.V.
Article

Access_open Basel IV Postponed: A Chance to Regulate Shadow Banking?

Journal Erasmus Law Review, Issue 2 2020
Keywords Basel Accords, EU Law, shadow banking, financial stability, prudential regulation
Authors Katarzyna Parchimowicz and Ross Spence
AbstractAuthor's information

    In the aftermath of the 2007 global financial crisis, regulators have agreed a substantial tightening of prudential regulation for banks operating in the traditional banking sector (TBS). The TBS is stringently regulated under the Basel Accords to moderate financial stability and to minimise risk to government and taxpayers. While prudential regulation is important from a financial stability perspective, the flipside is that the Basel Accords only apply to the TBS, they do not regulate the shadow banking sector (SBS). While it is not disputed that the SBS provides numerous benefits given the net credit growth of the economy since the global financial crisis has come from the SBS rather than traditional banking channels, the SBS also poses many risks. Therefore, the fact that the SBS is not subject to prudential regulation is a cause of serious systemic concern. The introduction of Basel IV, which compliments Basel III, seeks to complete the Basel framework on prudential banking regulation. On the example of this set of standards and its potential negative consequences for the TBS, this paper aims to visualise the incentives for TBS institutions to move some of their activities into the SBS, and thus stress the need for more comprehensive regulation of the SBS. Current coronavirus crisis forced Basel Committee to postpone implementation of the Basel IV rules – this could be perceived as a chance to complete the financial regulatory framework and address the SBS as well.


Katarzyna Parchimowicz
LLM. Finance (Frankfurt), PhD candidate at the University of Wrocław, Poland, Young Researcher at the European Banking Institute, Frankfurt, Germany – katarzyna.parchimowicz@uwr.edu.pl.

Ross Spence
EURO-CEFG PhD Fellow at Leiden University Law School, Young Researcher at the European Banking Institute and Research Associate at the Amsterdam Centre for Law and Economics – r.spence@law.leidenuniv.nl.
Article

The European Investment Bank

An EU Institution Facing Challenges and Providing Real European Added Value

Journal Hungarian Yearbook of International Law and European Law, Issue 1 2019
Keywords European Investment Bank, status and role of development banks, Green Bonds, European Fund for Strategic Investments (EFSI), InvestEU
Authors Zsolt Halász
AbstractAuthor's information

    Multilateral banks play an important role in financing larger investment projects within the EU and in most parts of the world. These institutions are less known than that commercial banks, even though many of these institutions – and in particular, the European Investment Bank – have provided a truly remarkable volume of financial support for the countries where they operate, including EU Member States. This paper introduces the largest of the multilateral financial institutions: the European Investment Bank. It elaborates on the specific regulatory framework applicable to its structure and operation as well as a number of special characteristics affecting this institution exhibiting a unique dual nature: a multilateral bank and an EU institution. This paper examines the complexity of the EIB’s operation, in particular, the impact of external circumstances such as EU enlargements of the past and the Brexit issue in the present. Beyond these specific questions, generic issues relating to its operations, governance, the applicable specific prudential requirements and the non-supervised nature of multilateral financial institutions are analyzed as well. This paper also reflects on the EIB’s unimpeachable role in financing the EU economy and on its pioneering role in bringing non-financial considerations, such as environmental protection into the implementation of financial operations.


Zsolt Halász
Associate professor, Pázmány Péter Catholic University, Budapest.

George Anthony Long
Fountain Hills, AZ United States, gal@legalparallax.com.
Article

Quo Vadis, Europa?

Loopholes in the EU Law and Difficulties in the Implementation Process

Journal European Journal of Law Reform, Issue 2 2016
Keywords EU Law, Quality of Legislation, Loopholes, Implementation, Joint Practical Guide
Authors Markéta Whelanová
AbstractAuthor's information

    EU law is a very wide-ranging legal system that comprises thousands of legal acts. It endeavours to regulate many relationships in the Member States of the European Union and effects everyday lives both of individuals and public bodies. EU law is, however, not always positively accepted. Such non-acceptance often follows from the increasing number of cases when EU law cannot be effectively applied on the national level. Significant reason for that lies in the poor quality of EU law.
    The article describes features that cause ambiquity of EU legislation, its complexity and incompleteness, that have a very detrimental effect on the application of EU law on the national level. Further it refers to defects of form of certain pieces of EU legislation that give rise to questions concerning legal certainty and due implementation into national legal orders. The article contains many illustrative examples supporting the presented points of view and indicates ways to be taken in the future.


Markéta Whelanová
Head of the Analytical Unit of the Department for Compatibility with EU Law of the Czech Office of the Government and Deputy Director of this Department. Vice-president of the Working Commission for EU Law of the Legislation Council of the Czech Government.

Menelaos Markakis
DPhil Candidate in Law, University of Oxford, Researcher, Erasmus University of Rotterdam.

Olivier Voordeckers
PhD candidate, University of Luxembourg and University of Piraeus.
Article

Financial Crime Prevention and Control

The Reforms of a ‘Unique’ Jurisdiction under EU Law and International Standards

Journal European Journal of Law Reform, Issue 4 2015
Keywords Vatican financial system, money laundering, terrorist financing, 3rd AMLD, FATF Recommendations
Authors Francesco De Pascalis
AbstractAuthor's information

    Between 2011 and 2014, the Vatican City State (VCS) experienced a reform process which dramatically changed its financial system. The process is still ongoing, and its goal is to establish an anti-money laundering and counter-terrorism financing (AML/CTF) system. Importantly, this system will be based on the AML/CTF EU legislation and international standards. These facts are noteworthy. First, the reforms cast light on the main Vatican financial institutions against the background of the secrecy that has always characterized their functioning and business operations. Accordingly, there is now more transparency and information about the Vatican financial system. Second, the relevant EU law and international standards are tools through which the VCS can, for the first time, join an international network of countries, sharing and applying the same rules against money laundering (ML) and terrorist financing (TF). This is of extraordinary importance for a jurisdiction like the VCS, which has never referred to European or international principles in its rule-making. In particular, the openness to EU law and international standards stimulates investigating the reasons behind these changes and the impact that these sources of law are having on a jurisdiction regarded as ‘unique’ in the world.


Francesco De Pascalis
PhD in Law, Institute of Advanced Legal Studies University of London; Research Fellow, University of Zurich, Law Faculty. All errors and omissions remain the author’s.
Article

Access_open From Individuals to Organizations: The Puzzle of Organizational Liability in Tort Law

Journal The Dovenschmidt Quarterly, Issue 2 2015
Keywords organizational liability, tort law, organizational design, organizational wrongdoing, law and economics
Authors Klaus Heine and Kateryna Grabovets
AbstractAuthor's information

    Organizational accidents have two generic sources: individual wrongdoings and organizational failures. Economic analysis of tort law is methodologically based on the “fiction” (Gordon 2013) of a rational individual, from which “simple rules for a complex world” (Epstein 1995) are derived. As a result, organizational wrongdoing boils down to a simple principal-agent problem, neglecting the complexity of organizational reality. We shed more light on organizational factors as a separate trigger of organizational wrongdoing. We take an interdisciplinary perspective on the problem, which challenges traditional economic analysis of tort law with insights drawn from organizational science. Moreover, we demonstrate how tort law and economic analysis can be enriched with these insights.


Klaus Heine
Prof. Dr. Klaus Heine (Corresponding author), Jean Monnet Chair of Economic Analysis of European Law, Erasmus School of Law – RILE, Erasmus University Rotterdam, Burgemeester Oudlaan 50, Room J6-59, Postbus 1738, NL-3000 DR Rotterdam, The Netherlands. Tel: 0031 (0)10 4082691; Fax: 0031 (0)10 4089191.

Kateryna Grabovets
Dr. Kateryna Grabovets, Rotterdam Business School (RBS), Rotterdam University of​Applied‍ Sci‍ences,‍ Kralingse Zoom 91, Room C3.121, 3063 ND Rotterdam; P.O. Box 25035, 3001 HA Rotterdam, The Netherlands.​Tel:‍ 0031‍ (0)10‍ 7946243. k.a.grabovets@hr.nl

Péter Fáykiss
Péter Fáykiss is the Head of the Macro-prudential policy department at the Magyar Nemzeti Bank (MNB), the central bank of Hungary. He graduated at Corvinus University of Budapest in 2009. After graduation, he joined MNB, where he worked as analyst at the Financial Stability Department. Between 2013 and 2014 he worked as Deputy Head of Financial Services Department at the Ministry for National Economy, and was responsible inter alia for the implementation of CRD IV in Hungary.

Dániel Papp
Dr. Daniel Papp is member of the Macro-prudential policy department at the Magyar Nemzeti Bank as a legal advisor. He graduated at ELTE law school in 2012. After having supervisory experience at the former Hungarian Financial Supervisory Authority, he was enrolled at LUND University for a postgraduate law course, called European Business Law (LL.M.). He made extensive research on the forming European supervisory framework, since his master thesis was about the Single Supervisory Mechanism and the Assessment of Hungary’s Possible Approach.

Anikó Szombati
Anikó Szombati leads the Macroprudential Directorate of Magyar Nemzeti Bank, the central bank of Hungary. This Directorate is responsible for the fulfillment of tasks originating from the Central Bank Act recognizing MNB as the macro-prudential authority of Hungary. The macro-prudential authority’s major task is to identify and mitigate system-wide risks in the financial intermediary system. The Directorate also contributes to the formulation of central bank opinion in major structural issues related to the financial sector developed either at EU or at the country level.
Article

Access_open Independent Supervisory Directors in Family-Controlled Publicly Listed Corporations

Is There a Need to Revisit the EU Independence Standards?

Journal The Dovenschmidt Quarterly, Issue 1 2015
Keywords corporate governance, board independence, independent non-executive or supervisory directors, listed family businesses, minority expropriation problem
Authors Fabian Imach
AbstractAuthor's information

    This contribution analyzes whether the current focus of the EU regulator on empowering independent directors is effective in corporations with a concentrated (family) ownership structure. The basic hypothesis of this contribution is that, contrary to the excessively optimistic expectations of the EU regulator, there are serious inefficiencies in the concept of independent directors when it comes to concentrated (family) ownership structures. The contribution relies on a series of empirical studies indicating a positive correlation between operating performance and family influence in European stock corporations.


Fabian Imach
Fabian Imach is management consultant at Societaet CHORVS AG, Gesellschaft für disruptive Wettbewerbsgestaltung in Düsseldorf. He has previously worked for BMW AG, JAFFÉ Rechtsanwälte Insolvenzverwalter (Lawyers and Insolvency Administrators) and Porsche Consulting GmbH. He holds a Master degree from Maastricht University, Faculty of Law.
Article

Beyond Financialisation?

Transformative Strategies for More Sustainable Financial Markets in the European Union

Journal European Journal of Law Reform, Issue 4 2014
Keywords financialisation, financial market integration, financial reform, financial innovation, financial crisis
Authors Dieter Pesendorfer
AbstractAuthor's information

    The global financial crisis has led many regulators and lawmakers to a rethinking about current versus optimum financial market structures and activities that include a variety and even radical ideas about deleveraging and downsizing finance. This paper focuses on the flaws and shortcomings of regulatory reforms of finance and on the necessity of and scope for more radical transformative strategies. With ‘crisis economics’ back, the most developed countries, including the EU member states, are still on the edge of disaster and confronted with systemic risk. Changes in financial regulation adopted in the aftermath of the financial meltdown have not been radical enough to transform the overall system of finance-driven capitalism towards a more sustainable system with a more embedded finance. The paper discusses financialisation in order to understand the development trends in finance over the past decades and examines various theories to describe the typical trends and patterns in financial regulation. By focusing on a limited number of regulatory reforms in the European Union, the limitations of current reforms and the need for additional transformative strategies necessary to overcome the finance-driven accumulation regime are explored. Finally, the regulatory space for such transformative strategies and for taming finance in times of crisis, austerity, and increased public protest potential is analysed.


Dieter Pesendorfer
Queen’s University Belfast, School of Law, d.pesendorfer@qub.ac.uk.
Article

Shifting from Financial Jargon to Plain Language

Advantages and Problems in the European Retail Financial Market

Journal European Journal of Law Reform, Issue 3 2014
Keywords financial markets, financial information, PRIPs/KIIDs, financial jargon, plain language
Authors Francesco De Pascalis
AbstractAuthor's information

    The purpose of this paper is to discuss the European regulatory efforts to guarantee investors a proper understanding of the characteristics of the products being offered in the retail financial market. In particular, the analysis emphasises the proposal to introduce plain language as a mandatory requirement for drafting pre-contractual documents relating to retail financial products.
    The 2007-2009 financial crisis brought to attention the importance of providing investors with more information on financial products to help them make informed investment decisions. However, more disclosure alone is not enough. The quantity and quality of information to be disclosed must go hand in hand with the way the information is communicated.
    Plain language is seen as an adequate tool to make information more transparent and understandable to the average investor. However, to make plain language a valuable instrument, it is necessary to enhance the ability of those who have the responsibility to apply it, that is, the financial products’ issuers and distributors.
    This aspect deserves proper consideration; otherwise, the benefit of plain language will remain on paper.


Francesco De Pascalis
The author obtained an LLM degree in Banking and Finance Law at Queen Mary University of London in October 2010 and is admitted as a barrister to the Verona Bar Society. Currently, he is doctoral candidate at the Institute of Advanced Legal Studies, University of London.

    This paper explores the roles that the presumption of innocence (PoI) can play beyond the criminal trial, in other dealings that citizens may have with the criminal law and its officials. It grounds the PoI in a wider notion of the civic trust that citizens owe each other, and that the state owes its citizens: by attending to the roles that citizens may find themselves playing in relation to the criminal law (such roles as suspect, defendant, convicted offender and ‘ex-offender’), we can see both how a PoI protects us, beyond the confines of the trial, against various kinds of coercion, and how that PoI is modified or qualified as we acquire certain roles. To develop and illustrate this argument, I pay particular attention to the roles of defendant (both during the trial and while awaiting trial) and of ‘ex-offender,’ and to the duties that such roles bring with them.


Antony Duff
Antony Duff holds the Russell M and Elizabeth M Bennett Chair in the University of Minnesota Law School, and is a Professor Emeritus of the Department of Philosophy, University of Stirling.
Article

Access_open Corporate Governance of Banks

Is More Board Independence the Solution?

Journal The Dovenschmidt Quarterly, Issue 2 2013
Authors Edyta M. Dorenbos and Alessio M. Pacces
Author's information

Edyta M. Dorenbos
Research fellow, Tilburg Law School, Department of Business Law and European Banking Center, Tilburg School of Economics and Management, Tilburg University, the Netherlands.

Alessio M. Pacces
Professor of Law and Finance, Erasmus School of Law, Erasmus University Rotterdam and Research Associate, European Corporate Governance Institute. We thank Sarah van den Brand for valuable research assistance.
Article

Access_open The Regulation of Rating Agencies in Europe

Journal The Dovenschmidt Quarterly, Issue 2 2013
Keywords Credit Rating Agencies, Regulation No. 1060/2009, ESMA, sovereign ratings, complex products ratings
Authors Edith Weemaels
AbstractAuthor's information

    This article presents the current and future statutory framework for ratings agencies in Europe. The recent financial and economic crises dealt a fatal blow to this practice and the EU clearly intends to progress as quickly as possible when it comes to the regulation of credit rating agencies. This article examines the possibility that new EU framework serve to strengthen the position of credit rating agencies through the elimination of their unquestioned role in the markets. The author also presents existing and future European regulations and analyses the establishment and implementation of prudential supervision of the rating activity.


Edith Weemaels
Lawyer – Brussels Bar, Liedekerke Wolters Waelbroeck Kirkpatrick (Brussels), e.weemaels@liedekerke.com.

Mark Pieth
University of Basel, Switzerland.
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