A Proposal for the Governance of Financial Regulation and Supervision in Europe

Financial markets underwent significant changes worldwide within the last decades. Structural changes involving traditional operators led to modifications of the regulatory as well as supervisory settings of the financial system. Therefore, the paper tries to find a solution for a proper and well functioning regulatory and supervisory framework for the European single market. In this context, some pragmatic ideas regarding the reorganization of the regulatory arrangements and supervisory settings of financial markets in the European Union are presented. Moreover, the paper tries to point out that it is too early to establish a single European supervisory authority. As the paper shows, it might be useful to make use of the gradually implemented Lamfalussy architecture and simply add one more committee which has the task to coordinate the activities of the four within the Lamfalussy architecture proposed committees. The institutional design of this committee is quasicentralized. The advantage of the proposal is that the institutional framework is characterized by a high degree of flexibility, meaning that its institutional arrangements can be transformed into a centralized supervisory authority and that it is cost-efficient since it is partly based on partly already existing structures.