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Publishers Abstract:
European financial regulation is already largely centralized: rulemaking and policy formulation is increasingly the result either of EU legislation, or of secondary rules drawn up by the European Committees. As to supervision, it seems reasonable that in the longer term some type of consolidation in European Financial Supervision will take place. This article identifies mainly two avenues, but there may be more, directly related to the way the markets will develop. Indeed, it is the markets that shape the structure of supervision, not vice versa. The first avenue is based on a multipolar scheme, leading to concentration and to consolidation. It follows the concentration in the markets. It is likely to include banking and insurance, and probably securities as well. It is market driven, as it would be left to the market participants to locate their headquarters. Under the present directives, this scheme, although still hesitantly, underlies the regulation on supervisory cooperation. The second scheme is top down, and is based on a hierarchical structure, where competences have to be allocated to the centre and to the periphery. It would create a regime of even supervision, at least for the largest institutions that operate Europe-wide, but would eliminate any form of supervisory competition, creating the risk of increasing the regulatory burden. Needless to say, the second scheme would call for a major political decision.
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