Courts’ Review of Regulatory and Supervisory Decisions

Abstract

Abstract This chapter analyses the role of courts and court review in shaping the structure of financial regulation and supervision, and its key regulatory concepts. First, it analyses the main case law on vertical power allocation of power between state and federal levels in the US, in cases on ‘the business of banking’, branching restrictions or FinTech charters, and national and supranational levels in the EU, in cases about the respective powers of the ECB and national supervisors, composite procedures, or the application of domestic law by EU institutions. Secondly, it analyses ‘horizontal’ cases, where courts reflected on the role of delegation to agencies. In third place, the chapter analyses the cases where courts scrutinized the ‘regulatory perimeter’ of ‘shadow banking’ activities and banking groups. In fourth place, the chapter makes a comparative assessment of the standard of review of acts by financial authorities. This comprises the substantive review under the ‘arbitrary and capricious’ standard in the US, using cost-benefit analysis, and the ‘finalistic review’ by EU courts, which insist on having the last word on the meaning of specific legal/regulatory concepts. It also compares the more ‘procedural’ dimension of ‘arbitrary and capricious’ in the US to the process-based review and procedural safeguards in EU case law. Finally, the chapter analyses the standard of review applicable to cases of ‘punitive’ measures, such as sanctions, penalties, and also other enforcement measures.