Domestic politics and national differences in restructuring EU financial supervision

ABSTRACT

When the 2007/2008 financial crisis hit the European Union's (EU) financial system distinct flaws of the pre-existing architecture of financial market supervision were exposed. In order to mitigate the impact of the crisis on its member states and to prevent recurrence, widespread calls within the EU arose about the need to revise the existing framework and adopt a new system of financial supervision. This new supervisory structure, known as the European System of Financial Supervisors (ESFS), started operating on 1 January 2011. Despite the fact that European countries’ responses towards the necessity to reform EU financial supervision converged, they however fiercely debated this issue which resulted in considerable discordant national policy positions towards the precise role and structure of the ESFS. This article investigates this empirical puzzle thereby focussing on the European Supervisory Authorities (ESAs). Following the societal approach to governmental preference formation it is argued that governmental positions are shaped by domestic material interests and societal ideas, and in order to remain in office these are prone to be responsive to domestic sources. This argument will be examined in a cross-country comparison through an analysis of the national policy positions of Germany and the United Kingdom.

KEYWORDS:

• Domestic politics
• financial supervision
• societal approach
• governmental preference formation
• Germany
• United Kingdom

Acknowledgements

This article is a substantially revised version of a conference paper presented at the 8th Pan-European Conference on International Relations (EISA), 18-21 September 2013, Warsaw. I am very grateful to Gabriel Siles-Brügge, André van Loon, Stefan Schirm and Hubert Zimmermann for their helpful input, comments and/or suggestions on earlier drafts of this article. This research has been made possible due to the generous financial assistance provided by RUB Research School PLUS.

ORCID

Aukje van Loon http://orcid.org/0000-0003-4933-3327

Notes

1 With the exception of the Czech Republic.

2 The ESRB has no legal personality (European Commission, 2009a, pp. 7–8).

Additional information

Funding

This research has been possible due to the generous financial assistance provided by RUB Research School PLUS.