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Global coordination of capital market regulations and data requirements - Resilience of the EU financial sector in the global context

A new EU approach to global rule-making coordination

By Van Nieuwenhuizen Cora - MEP, Committee on Economic and Monetary Affairs, European Parliament

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The financial crisis has sparked a global financial-regulatory avalanche. Despite the need for coordination in an ever-integrated financial world, and despite the statement by G20 leaders in 2009 about the importance of implementing ‘…global standards consistently in a way that ensures a level playing field and avoids fragmentation of markets…’, global regulatory work has been unable to prevent inconsistencies in legislation between different jurisdictions.

Some of the inconsistencies are structural and to some degree necessary: national (or European) political processes are indispensable but inherently messy.

Yet many inconsistencies and spillovers can be avoided. The EU, as one of the largest financial centers in the world has a special role to play. This is especially true following the launch of its Capital Markets Union initiative, which should not just remove intra-EU barriers, but also bring in outside investors.

In particular, the EU should adhere to 4 basic principles, which will help ensure its rules are more aligned with international regulatory developments:
1. Greater involvement by (global) regulators and other jurisdictions in the EU legislative process to focus attention on third-country issues.
2. Comprehensive new regulations should be put in place only after international work has been completed and after clear transposition commitments have been received from other jurisdictions. The delay in the introduction of CCP resolution legislation is a welcome development.
3. Where global implementation is limited but EU-legislation is deemed necessary, individual recognition on the basis of international principles must be an option, as it is in the new Benchmarks Regulation.
4. Gold plating of international standards must be minimized, for instance by making use of regulations instead of directives, or by pushing for more granular global standards. Gold plating should especially be opposed by EU-institutions that were present during international negotiations.

New technological innovations will increasingly make national borders and regulations obsolete. Global approaches and cooperation are needed more than ever; and the EU must take the lead.