Consumers of Financial Services and Multi-Level Regulation in the European Union

Focusing on the consumer's role in EU decision-making illuminates the tension between a model of supranational rule-making as an expertised, technocratic, administrative domain, and a model of regional integration as an extension of domestic democratic politics. The European project for internal market integration has developed from the technocratic model which had a relatively limited impact on the lives of individual European voters to a much more far-reaching model with enhanced democratic aspects. The paper focuses on the EU's processes for developing harmonized rules of financial regulation, and on the role of consumers in these processes, from their involvement in consultation through the European Economic and Social Committee, to a more recent, more visible, role as stakeholders in the regulatory process. This change has occurred as EU-level rules increasingly pre-empt national decision-making with respect to financial regulation, and as commentators have identified an accountability deficit in supranational standard-setting and rule-making bodies. Consumer groups and financial trade associations have different views on what quantity and what varieties of harmonization are desirable. Consumer groups and trade associations disagree even about the management of the process of rule-making. The difficulty of resolving the tensions between the views of consumer groups and financial firms in the context of financial services policy raises real questions about the potential of functional participation to legitimate European rule-making in this area