Regulatory cascading: Limitations of policy design in European banking structural reforms

Abstract

This article examines banking structural reforms introduced in the European Union (EU), placed in an international context. The concept of ‘regulatory cascading’ is put forward to investigate how European policy-makers tackle complex multi-faceted problems, such as that of banks which are ‘too big to fail’. The article shows that partial solutions to the problem introduced in other areas of banking regulation, coupled with strategic activism at the domestic level by key EU member states have constrained the opportunities to design a coherent EU framework regulating bank structures. In response to the Commission's proposal for harmonised European banking structural reforms, the Council has stressed in its position two approaches that closely correspond to the measures adopted in France and Germany, on the one hand, and the UK, on the other hand.