Financial market regulation

from Wikipedia, the free encyclopedia

Financial market regulation is a special form of state activity that directs, supervises and controls financial institutions and market events by means of a set of rules. It is intended to protect investors from the risk of default, reduce liquidity and systemic risks and thus guarantee the supply of money to an economy and price stability. Financial market regulation extends to all three areas of the financial market: banks, insurance companies and securities trading.

Risks

The decision as to whether regulatory measures are to be carried out in certain economic sectors and to what extent and in what way is fraught with potential sources of error. Regulation only makes economic sense in those areas of the market in which no efficient allocation of resources is guaranteed. Another problem is choosing the right “tools”. Regulation ties up a lot of resources that could be used elsewhere. Another risk is hidden behind the globalization of the financial markets . In principle, the national government is responsible for the financial market regulation of the respective country. It is advantageous for them to have the lowest possible regulatory measures than abroad in order to bring capital and financial transactions into the country. This type of regulatory policy leads to competitive advantages for domestic companies over foreign countries, but at the same time increases the likelihood of domestic crises, which can also affect other countries due to globalization.

history

  • Until the 1980s, the securities sector was characterized by extensive self-regulation by the stock exchanges. The countries that were responsible for overseeing stock market events followed a policy of "non-interference". The universal banks, which had a majority of seats on the administrative bodies, supported the existence of the numerous regional stock exchanges. In the 1980s, German banks began to increasingly orientate themselves towards international competition. So won z. B. Investment banking is becoming more and more important. The banks advocated the modernization and centralization of securities trading in order to lower their costs and attract foreign investors. At the same time, the German system of self-regulation came under increasing criticism, not least because from the perspective of other countries it was considered to be non-transparent. In 1994 the Federal Ministry of Finance (BMF) founded a new division, the “Federal Supervisory Office for Securities Trading” (BaWe). In the same year, the Securities Trading Act (WpHG) came into force.
  • Unlike the securities sector, regulation of the banking sector began as early as the banking crisis of the 1930s. The legal basis for state supervision of all credit institutions is the Banking Act, which dates back to 1934 when it was founded. In 1961, the Federal Ministry of Economics (later the Federal Ministry of Finance) established the Federal Banking Supervisory Office (BAKred) as the highest federal authority.
  • The insurance market has been regulated for more than 100 years. As early as 1901, the imperial supervisory office based in Berlin took over the supervision and market regulation of private insurances on the basis of the Insurance Supervision Act (VAG). In 1952 these functions were taken over by the newly established federal supervisory office for insurance and building society savings. When in 1972 the supervision of building societies was transferred to BAKred, the name was changed to the Federal Insurance Supervisory Office (BAV).

On May 1, 2002, the Federal Banking Supervisory Office (BAKred) merged with the Federal Supervisory Office for Securities Trading (BAWe) and Insurance (BAV) to form the Federal Financial Supervisory Authority (BaFin).

EU financial market regulation

In March 2000, at the European Council in Lisbon, the member states decided on extensive harmonization of financial market regulation in the EU. The FSAP (Financial Services Action Plan) was used as a template. This should lead to a uniform, open and secure European internal market for financial services.

Lamfalussy process

In July 2000, the European finance ministers commissioned a group of experts, consisting of 7 central bankers and market participants, to draft a new and fast rulemaking procedure for EU financial market regulation. This is how the so-called Committee of Wise Men came into being, chaired by Alexandre Lamfalussy. The aim was to accelerate and make the entire regulatory process more flexible, which should enable the EC directives to be adapted more quickly to market changes. The developed procedure was adopted in 2001 as the Lamfalussy procedure by the Stockholm European Council.

The Lamfalussy process divides regulation into four levels. Level 1 is based on the co-decision procedure according to Article 201 of the European Treaties, on which the Council of Ministers and the European Parliament decide on fundamental political questions. At the next level, the comitology procedure, which consists of the CESR (Committee of European Securities Regulators) and the ESC (European Securities Committee), regulates numerous technical details. At level 3, the national supervisors in CESR take on the coordination of the uniform implementation of the EC directives in the individual member states. Finally, on level 4, the timely and complete implementation of the EC directives is checked by the EU Commission.

CESR

The Committee of European Securities Regulators (CESR) is an independent body of experts for securities markets, in which high-ranking representatives of the national supervisory institutions are represented.

ESC

The European Securities Committee is the actual comitology committee. This consists of the representatives of the member states and decides on the draft of the implementing provisions proposed by CESR and submitted by the committee.

CEBS

Since the end of 2003, the Lamfalussy process has also been used to regulate the banking and insurance sectors. The tasks of the CESR in the banking sector are taken over by the Committee of European Banking Supervisors (CEBS). In the insurance sector, the Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) is entrusted with the tasks of the CESR.

ESMA

The new European securities regulator ESMA , based in Paris, is to supervise the rating agencies from 2011.

EBA

From 2011, the European Union will also have a new banking supervisory authority. EBA , based in London, has the authority to instruct the commercial banks directly and to oblige the national supervisory authorities to take action in the event of a crisis.

EIOPA

As part of the supervisory reform on January 1, 2011, the previously only advisory committee CEIOPS will be called EIOPA (European Insurance and Occupational Pensions Authority) and will have its seat in Frankfurt am Main. With the transformation of CEIOPS into the European insurance supervisory authority EIOPA, the competencies of EIOPA will be significantly expanded. In this way, EIOPA can direct binding individual decisions to insurance institutions and is supposed to arbitrate in the event of differences of opinion between national supervisory authorities. In order to ensure the stability of the financial markets in the event of a crisis, EIOPA is to be given special powers and, within the scope of its responsibilities, can oblige the national supervisory authorities to take measures by a simple majority.

ESRB

The European Systemic Risk Council (ESRB) is to be set up as a new independent body for the monitoring and assessment of the potential risks to financial market stability that arise from economic developments. The ESRB will warn of emerging system-wide risks and make recommendations to mitigate these risks.

De Larosière report

The De de Larosière report is a report by a high-level group of experts led by Jacques de Larosière , the former chairman of the International Monetary Fund. The report was published on February 25, 2009. It comprises 68 pages with 36 recommendations on the supervision of the European financial situation and financial markets, as well as on European cooperation between the responsible bodies and EU supervisory authorities in matters of financial stability, early warning systems and crisis management.

Financial market regulation USA

Glass-Steagall Act

The Glass-Steagall Act refers to two federal laws that were passed by then US President Franklin D. Roosevelt as a result of the Great Depression in 1932 and 1933 . These laws saw u. a. the institutional separation of the commercial and investment banks in order to prevent the "refinancing" of the bad speculation through customer deposits. In 1999 the Glass-Steagall Act was withdrawn by then President Bill Clinton .

Dodd-Frank Act

The Dodd-Frank Act, also known as the Dodd-Frank Wall Street Reform, is the largest and most significant intervention in US financial market regulation since the 1930s and is essentially based on the so-called Volcker rule . It includes over 225 new regulations u. a. to minimize the risk of the investment business of the banks and influences the competencies of the 11 US federal authorities. The law was passed by the Obama administration in 2010 .

Financial market regulation worldwide

The number and importance of international bodies have increased significantly in recent years, especially after the global economic crisis of 2009. Her areas of responsibility include accounting and auditing of the annual financial statements, transparency as well as money laundering and terrorist financing.

The International Organization of Securities Commissions is responsible for overseeing the rating agencies. As part of this task, the IOSCO has drawn up a code of conduct which helps avoid conflicts of interest and ensures the confidentiality of information between the rating agency and the investor.

The Financial Stability Board has been the successor to the Financial Stability Forum (FSF) since 2009 and deals with the development and implementation of the rules for stabilizing the financial markets.

The Basel Committee on Banking Supervision is a forum for permanent cooperation between national banking supervisors. Its aim is to improve international banking supervision by sharing information and experience at national level.

  • IAIS

The International Association of Insurance Supervisors is committed to improving regulation of insurance markets at both international and national levels. Its aim is to promote and develop a well-regulated insurance market and to ensure the stability of financial markets.

  • Joint Forum

The Joint Forum was founded in 1995 under the auspices of IOSCO, BCBS and IAIS and is a gathering of representatives of banking, securities and insurance regulators from various countries who deal with the supervision of financial conglomerates .

literature

  • Lotte Frach: Financial market regulation in Germany , Nomos Verlag, August 2010
  • Stefan Schueder: How much control does the international financial market need? , Optimus Mostafa Verlag, September 2009
  • Bernd Britzelmaier: Regulation or deregulation of the financial markets , Springer Verlag, February 2009
  • Beat Bernet: Cost / benefit analysis in financial market regulation , Haupt Verlag, August 2005
  • Thomas Schürmann, Wulf Hartmann, Hartwig Sprau: The Civil Law Implementation of the Payment Services Directive: Financial Market Crisis and Implementation of the Consumer Credit Directive , Gruyter Verlag, May 2010
  • Thomas Hartmann-Wendels, Andreas Pfingsten, Martin Weber: Bankbetriebslehre , Springer Verlag, 2010
  • Viral V. Acharya, Thomas F. Cooley, Matthew P. Richardson, Ingo Walter: Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance , John Wiley & Sons, November 2010

Web links

Individual evidence

  1. ↑ Stefan Schueder: How much control does the international financial market need? , August 2009, p. 40
  2. ^ Susanne Lütz: From Managed to Market Capitalism? German Finance in Transition , 2000, p. 158
  3. ↑ Lotte Frach: Financial Market Regulation in Germany , August 2010, p. 112
  4. ↑ Peter Koch: 100 Years of Uniform Insurance Supervision in Germany , 2001, p. 1467/1468
  5. ↑ Lotte Frach: The Participation of Interest Group in the Lamfalussy Process. A New Quality of Participatory Legitimacy? , 2005, pp. 6/7.