TTIP and the ‘finance exception’: Venue-shopping and the breakdown of financial regulatory coordination

Abstract

This article asks why financial market regulatory coordination did not form a major part of the US and EU negotiations on the Transatlantic Trade and Investment Partnership (TTIP). Given the highly interconnected nature of transatlantic financial services, common experiences of insufficient regulation exposed by the global financial crisis, the G20 commitments made by both blocs, and the awareness that uncoordinated re-regulation could threaten global financial stability, the United States and the EU arguably had every incentive to make financial services a central pillar of the TTIP. Yet financial services coordination is conspicuous by its absence. We argue that the breakdown in financial coordination was driven by the fact that US authorities moved more quickly and in ways less appreciated by major actors in the financial sector than their EU counterparts in implementing the G20 agenda. This has given rise to ‘venue-shopping’ on the part of the largest financial firms. Rather than try to tackle US regulatory agencies head-on, they hope to gain traction on the US regulatory process by influencing how European partners approach contentious issues. We conclude that where we used to worry that firms would shop the lightest regulatory environment, now there is concern that they will shop the most porous lobbying arena.