Until 2010 the regulatory world was easy to understand. There was the Federal Financial Supervisory Authority (BaFin), which was essentially responsible for the supervision of credit and financial services institutions, and the Deutsche Bundesbank (DBB), whose local presence gave it greater proximity to events. The division of responsibilities between the two institutions was set out in a Guideline. After 2010, however, things became more complicated. Three new European supervisory authorities for microprudential oversight were added. They were the European Banking Authority (EBA), the European Insurance and Occupational Pensions Authority (EIOPA) and the European Securities and Markets Authority (ESMA). In addition, the European Systemic Risk Board (ESRB) was established as a new authority responsible for macroprudential oversight. Together, all four institutions form the Joint Committee of the European Supervisory Authorities (ESAs) and, together with the national competent authorities (NCAs), comprise the European System of Financial Supervision (ESFS).
That was preceded in 2008 by a high-level expert group chaired by Jacques de Larosière, which was established through an EU mandate for the purpose of reorganising European financial supervision. The experts clearly took no notice of the old saying that too many cooks spoil the broth, but proposed the establishment of a number of new institutions at European level. The proposals were accepted by the European Parliament and the Council in November 2010. The new authorities began work in January 2011, alongside the previously established national authorities. However, just one year later, in 2012, the European Commission came up with the idea or further centralising supervision in Europe. As a result, the banking union came into being in 2014 with the additional supervisory institutions of the ECB and a central bank resolution authority (SRB), which began work in 2015 and thus joined the existing institutions.
In the wake of the 2007 financial market crisis a number of different initiatives were launched with the aim of improving financial market regulation. No product, no financial market institution and no financial market was to remain unregulated in the future. Not a simple undertaking. In a market economy, the state establishes the legal framework for the market players in order to create legal certainty for all concerned, to counteract external effects that are detrimental to the broad community and to cut transaction costs incurred by market participants, the overall aim being to increase market efficiency. In so doing, the state always has to deal with conflicting priorities. On the one hand, the regulatory framework needs to be precise enough to rule out undesirable arbitrage and abuse but, on the other hand, it should not hamper economic development, as in economic life there is a complex relationship between orderliness and security on the one side of the scales and economic dynamics on the other. Only a cursory glance might lead to the supposition that insecurity decreases as the degree of organisational orderliness increases because the scope for decisions by economic subjects is narrowed. However, as the economy does not evolve within a closed system, i.e. new methods and innovative approaches, the appearance of new market players, demographic developments, etc. repeatedly make ongoing adjustment processes necessary, excessive rigidity in any narrowing of the vital adjustment process can contribute to stagnation and the collapse of the subsystem. This applies, in particular, when an overall system is divided into subsystems that are regulated independently of one another, resulting in the loss of the overall connection between the subsystems and of their interdependence.
It is therefore difficult to assess how the specific financial market regulations that have currently been tabled actually function in this complex interplay.
In connection with the previous outline of the institutional structure, the following LINKS to the relevant acts, regulations, guidelines, circulars, etc. convey a sense of the new complexity of the context in which financial market regulation is evolving. The first evaluation results show at least that the assessment of the new world is not without ambiguity. This overview does not go into detail about the new regulations that since spring 2015 may be subsumed under the term “creation of an EU capital markets union”. These essentially consist of the redrafting of the securitisation regulation and other considerations about how to ease credit transfer and corporate financing via the capital market.
As yet, there has been no comprehensive evaluation of financial market regulation after 2008. Although the Federal Ministry of Finance (BMF) presented an evaluation report in the summer of 2015, that report does not go far enough and is incomplete (Review of Regulatory Measures in the Financial Market). In the case of infrastructure investments under Solvency II, reference is made to the still ongoing review of whether it may be possible to introduce another capital requirement to avoid undermining the aim of infrastructure financing. Actual easing brought about by the removal of inconsistencies is mainly being considered for some reporting areas, for example various obligations to report on the liquidity situation, the procedure for grouping borrowers, data exchange between supervisory and resolution authorities, and the EMIR reporting obligations for non-banks. However, to a large extent, the planned amendments have not yet been implemented in practice, meaning that it is not yet possible to give a precise evaluation of a possible easing.
All in all, the report that has been presented thus limits itself to obvious inconsistencies at the direct technical level (e.g. between reporting forms); undesirable interaction between the effects of the new financial market regulations is largely ignored. An apparently more comprehensive assessment was published in the report presented by the German business sector (BDI/DIHK) during the consultation with the BMF in the autumn of 2015; it also stressed the need for substantial amendments (BDI/DIHK opinion)