Europeanisation of Banks' Corporate Governance - The Impact of Two Crises

Abstract

The article explores the ‘Europeanisation’ of banks’ corporate governance and it illustrates how the process is influenced by the increased concern of maintaining financial stability. Corporate governance was an area of banking law that was not in the spot-light of the EU’s harmonisation efforts, but the financial crisis (2008) and the sovereign debt crisis (2011) caused substantial changes. Not only the level of harmonisation but also the institutional set-ups for both regulating and supervision in the area are changed. The creation of the European Banking Authority (EBA) and the Single Supervisory Mechanism (SSM) plays a key role. Thus, the Europeanisation of banks’ corporate governance consists of two components – enhanced harmonisation and new regulatory and supervisory frameworks. The article argues that both components are radical innovations in the EU banking law. First, harmonisation changes both the regulation method and who the regulator is. Second, the partial federalisation of the supervisory authority is a fundamental novelty. Corporate governance is no exception to the fact that EU banking law is developed incrementally; policy action plans have been carried out but it was the financial crisis that speeded up the pace and brought significant changes to the legislation. The aim of the article is to ascertain whether it can be documented that the financial crisis (2008) and the sovereign debt crisis (2011) led to Europeanisation of banks’ corporate governance. The thesis is that the crises have supplemented the objective of an internal market for banking raising further sub-objectives. It is analysed whether objectives such as ‘safe and sound banks’ and ‘financial stability’ can be regarded as decisive for the considerable change in the EU policy for regulating and public super-vision of banks’ corporate governance. The article is structured as follows. Section 1 introduces the topic and defines the term ‘Europeanisation’. Section 2 examines the development of the EU objectives be-hind the Europeanisation of banks’ corporate governance. In particular it is discussed whether the process is the result of an expanded objective and how the regulatory pol-icy has changed. Section 3 outlines the measures brought in use to achieve the objectives, e.g. harmonisation and new regulatory and supervisory frameworks. Section 4 scrutinises the measures taken in relation to the EU principles of subsidiarity and proportionality. Sections 5 and 6 explain the new regulatory and supervisory framework in relation to banks’ corporate governance, which itself is an outcome of the enhanced harmonisation. Section 7 serves as a conclusion.