The Regulation of Cross-Border Financial Services in the EU Internal Market: A Primer for Third Countries

Abstract

While numerous articles and reports identify problems and obstacles that continue to impede the completion of a European internal market in financial services, this article is intended to review the progress that has been made to date in Europe in a more positive light. A considered appraisal of European Union directives adopted in the field of financial services and markets exposes the iterative development of a highly coordinated legal and regulatory framework calculated to permit the creation of a pan-European securities market and to achieve a progressive liberalization of restrictions on the cross-border provision of services by financial intermediaries and markets within Europe. Through the implementation of this framework, the European Union has acquired significant experience concerning cross-border services provided by financial intermediaries and markets and has developed unique methods to oversee those services. This article is intended to provide users of EU financial markets with an overview of the thinking underpinning the European Union's approach to the regulation of financial services. As such, it provides: (i) a general overview of the basic policy objectives pursued by the European Union in the field of financial services and markets; (ii) a general overview of the legal framework within which such policies are pursued; (iii) a analysis by topic of the methods that have been developed by the European Union to regulate the cross-border provision of services by financial intermediaries and markets; (iv) a review of initiatives to reorganize the European financial infrastructure to facilitate the cross-border provision of financial services within Europe; and (v) a review of other current initiatives to enhance European regulations in the field of financial services and markets. The article includes an analysis of the components of the mutual recognition regimes for financial services and markets within the EU internal market and of the manner in which general conflicts of laws principles and the historical methods of regulating cross-border financial services in Europe have manifested themselves in the EU financial services directives. Where possible, the European Union approach to financial services regulation is contrasted with the United States approach. Lastly, the implications of the European experience on current issues regarding the international integration of financial services and markets also are considered.