Priciples of financial regulation - Appunti

FCA UK

Ecc... These authorities are specialized (Banca d'Italia for banking system and Consob for capital markets) and are independent. Independence No institutional arrangements through which these authorities should report to the government. They do not have a formal obligation to report to the government and for this reason the government is interested to the chairman, there would be less clashes and contradictions. Independence is an institutional quality rather than an absolute feature. The reason to have this kind of authorities allows to prevent externalities and at the same time they are specialized and quick and write the laws very quickly and efficiently.

Problems related to this model:

Concentration of powers:

• Strong division of power in government:
• Legislative Parliament.
• Judicial Court system.
• Apply the law and manage the public administration Government.

If all the powers are in a single person, I can abuse the power as an executive. If the powers are splitted

with political implications means political responsibility The Government can decide whatever it wants. If decisions of the government are not liked by the citizens the members of the Parliament would be punished through people voting power. The power of the Government is balanced by the political responsibility Spiderman Rule: No power without responsibility. Supervisory Authorities do not take responsibilities because they are not elected, this is a big violation of the Spiderman rule Democratic Issue. If I have a problem with a professor's mark, I can claim to the deem which is the superior authority. If the professor is the one who pushed for the election of the deem, he won't be tough with the professor. Going to the superior authority needs the authority to be independent enough and capable. When there is an abuse of power you can go to the superior authority and claim, this is what you can do when you are under a supervisory authority, you can go to the judge. In any case the

best possible.(Remember the mandatory reading).

Once we have the public consultation with the market, the lobbies will try to influence the lawmakers.

Which are the jobs of these authorities?

BaFin (German authority) Used to be in charge for everything, was the single supervisor for both issues of stability and disclosure.

Other authorities are expression of different model The Twin Peaks' Model: two different authorities with two different goals.

Bank of Italy cares for the issue of stability.

Consob cares about how intermediaries conduct.

What is the reason for a twin peaks' model?

They may be conflicting each other.

If you go for stability, you do not like disclosure too much and vice versa.

Stability and transparency are competing purposes, if you give all the supervisory power to a single entity, you will have one goal overcoming the other; if you split the power to two authorities maybe they will clash but the final outcome will be more balanced.

This model allows more

Specialization and commitment to the goal of the single institution. The Twin peaks' Model may duplicate the cost of compliance.

The EU origin of the financial regulation. The European Union. It is something unique because it is something between the United Nations and the United States of America. UN International organization. US Federal State. Example: Russia invades Ukraine and the UN voted against this invasion. This did not work. Imagine that instead the governor of Illinois thinks that raising interest rates is no good and the governor of Texas thinks it is good. Who takes the decision? The governor of the Central Bank without taking into consideration their opinion. What is the difference? In a Federal State, the members delegate part of their power to a different entity (Illinois and Texas gave up their power over monetary policy to the Federal State, therefore to the Fed). In a Federal State, there is sovereignty, which is the power of a single State over its territory and people living on.

the territory. In the Federal State there is the delegation of sovereignty from the States participating to the Federal State to a different entity which is the Federal State whereas in a National Organization there is a group of people deciding among them something without giving up their sovereignty, so if someone disagrees with the resolution of the United Nations there is nothing to do because there is no delegation of power.

International Organizations Form of Intergovernmentalism Relationship among governments.

Federal State Supra Nationalism Something over the States belonging to the entity.

The EU is something in the middle, this is why it is unique.

The EU is an International Organization but with some features of a Federal State even though these features are much less than a full Federal State.

This is a working process, the EU in the intention of some states is going more and more towards a Federal State while anti EU people think it shouldn’t.

If this is the case there is

Nationalist features, the competences are delegated to the Union are identified through the treaties. The rule is that the competences are with the State and the exception is that they are with the Union. The competence with the Union can be exclusive (e.g., Monetary Policy in the Euro Zone) or shared (Internal Market); in case of shared competence the principle of Subsidiarity governs when the Union can step in. The Union can step in only if the objectives of an action of the Union can be reached at the Union level much better than at other Members States' level.

One more point: Once we have identified the competences, how actually the laws of the European Union are made?

Legislative process

Ursula Von Der Leyen President of the European Commission.

European Commission There is a commissioner for each country and each commissioner is in charge for a certain field of the competencies of the Union. The defense, for example, is not a competence of the Union so there is no commissioner.

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