The Europeanization of financial regulation and supervision on the Baltic–Nordic axis: the perspective of national bureaucracies

ABSTRACT

This article presents a comparative case study about the impact of Europeanization on two types of small North European states after 2008. For our case study countries, this is mainly a process of Europeanization. Our analysis focuses on interpreting the Europeanization process from the perspective of bureaucracies: we attempt to understand financial bureaucracies’ perceptions of, attitudes toward, and reactions to the post-2008 developments in financial regulation and supervision in Sweden, Norway, Estonia, and Latvia. This enables us to reflect on the implementation performance and embeddedness of post-2008 regulatory and supervisory principles in these countries.

KEYWORDS:

• Europeanization
• financial bureaucracy
• financial regulation
• financial supervision
• Estonia
• Latvia
• Sweden
• Norway

Disclosure statement

No potential conflict of interest was reported by the authors.

Interviews

Estonia:

Est1: Official of the Financial Supervisory Authorities (FSA), 8 October 2014

Est2: Official of the Eesti Pank, 9 October 2014

Est3: Official of the Ministry of Finance, 30 September 2014

Est4: Official of FSA, 6 October 2014

Est5: Official of Ministry of Finance, 16 October 2014

Est6: Official of Ministry of Finance, 22 September 2014

Est7: Official of Ministry of Finance, 25 September 2014

Latvia:

Lat1: Official of Ministry of Finance, 17 September 2014

Lat2: Official of Financial and Capital Market Commission (FCMC), 18 September 2014

Lat3: Official of Latvijas Banka, 19 August 2014

Lat4: Official of Latvijas Banka, 19 August 2014

Lat5: Former official of FCMC, 14 November 2014

Sweden:

Swe1: Official of Sveriges Riksbank, 4 November 2015

Swe2: Official of Sveriges Riksbank, 4 November 2015

Swe3: Official of Sveriges Riksbank, 4 November 2015

Swe4: Official of FSA, 11 December 2015

Swe5: Official of FSA, 10 December 2015

Norway:

Nor1: Official of FSA, 4 May 2016

Nor2: Official of Norges Bank, 4 May 2016

Nor3: Official of FSA, 4 May 2016

Nor4: Official of FSA, 7 June 2016

Nor5: Officials of Ministry of Finance, 8 June 2016

Nor7: Official of Norges Bank, 9 June 2016

Nor8: Official of Norges Bank, 10 June 2016

Notes

1. See Börzel (2002), Kassim (2003), Knill (2001), Trondal (2000), Lægreid, Steinthorsson, and Thorhallsson (2004), Egeberg (1999), and Steen and Schaap (2004) on the Europeanization of national administrations and public officials.

2. Transposition is ‘the way in which EU legislation is incorporated into national law, whereas implementation looks at the application of EU law at national level’ (Montoya and Schrefler 2009, 72).

3. There are various typologies of impacts or outcomes of Europeanization that reflect the degree and substance of changes such as inertia, absorption, transformation, etc. at the national level (see Radaelli and Pasquier 2008; Börzel and Risse 2003; Bulmer 2008; Schmidt 2002; Heritier 2005; Caporaso 2008).

4. These can include the scope and type of market interventions, the role of central banks and other government institutions and the involvement of various stakeholders in policy design as well as implementation that varies among nation states (Lynggaard 2013).

5. See Börzel (2002); Bulmer (2008); Dyson (2008); Jordan (2003); Lodge (2002); Randma-Liiv (2002); Jacobsson, Lægreid, and Pedersen (2004) on these opposing functional approaches.

6. The third pattern of governance elaborated by Bulmer and Radaelli (2004) – facilitated coordination – is irrelevant in the context of the current article, as it addresses policy areas, where the EU arena is of secondary importance, while the national governments are the main players.

7. Often, EU regulatory policies also define procedural aspects as well as organizational structures (Knill and Lenschow 2005, 586) such as in relation to the registration and processing of prospectuses at the supervisory authority. In the Estonian case, no specialists have been hired to deal with prospectuses and these are dealt with by an accountant and a lawyer at the FSA (Est4), which reveals the adaptation of a job position to a person’s profile rather than the other way around (Randma-Liiv 2002, 380).

8. In addition, general trends toward supervisory consolidation based on the home-country principle and the centralization of banks’ business functions have made the supervision of subsidiaries by host country authorities more difficult (Juuse 2016a).

9. These are the Ministry of Finance, Central Bank, Financial Supervision Authority, and National Debt Office.

10. ‘Memorandum of understanding between the Finnish, Norwegian and Swedish Ministries of Finance and the Danish Ministry of Business on cooperation regarding significant branches of cross-border banking groups,’ 9 December 2016. https://www.regjeringen.no/contentassets/1d66c88174d44d78a87ba618eca17d52/mou.pdf.

11. There has been the accommodation of the EEA agreement to the EU’s financial supervisory system: the Norwegian FSA has been made a member of the EU’s three supervisory authorities (without voting rights) and now participates in all work of a non-binding nature (Finanstilsynet 2016, 40).

12. ‘Response to the European Commission’s Consultation on the Review of the EU Macro-Prudential Policy Framework,’ European Commssion DG Financial Stability; Financial Services and Capital Markets Union, 24 October 2016. https://www.regjeringen.no/contentassets/9e6be89d2410407d8d4bee061a1c1c9f/letter_spor.pdf.

Additional information

Funding

The research leading to these results received funding from the Estonian Research Council (Grant PUT-1142) and the Norwegian Financial Mechanism 2009–2014 under project no. EMP264.

Notes on contributors

Egert Juuse

Biographies of Egert Juuse, Ringa Raudla and Aleksandrs Cepilovs have been already submitted for a special issue of JBS (Ten years after the financial crisis in the Baltic Sea Region: implications, perceptions, legacies and lessons for the future) with the paper ‘Policy Learning from Crisis in Financial Regulation and Supervision: Comparative Analysis of Estonia, Latvia and Sweden’

Olga Mikheeva

Olga Mikheeva BA MA (Tallinn University of Technology) is a junior research fellow at Ragnar Nurkse Department of Innovation and Governance, Tallinn University of Technology. She takes part in the research projects ‘Innovation and the state: How should government finance and implement innovation policy’ financed by the Institute of New Economic Thinking (INET) and ‘Institutions and Economic Development in East Asia and Central and Eastern Europe’. In addition, Olga acted as the coordinator for the research project ‘Understanding policy change: Financial and fiscal bureaucracy in the Baltic Sea Region’ (EEA grants Norway). Her main research interests include economic development and governance of innovation policies in regards to the developing countries with a special focus on East Asian states as well as Asian regionalism.