Abstract
Uniformity, Differentiation, and Experimentalism in EU Financial Regulation: The Single Supervisory Mechanism in Action
Highlights
How can advances in European integration be reconciled with diversity among Member States? Rightly or wrongly, EU regulation has acquired an increasingly contested reputation, at least within the Union itself, where the “Brussels rule factory” has become a term of abuse even among committed supporters of the European project (e.g. van Middelaar 2019)
Discussions within the European Banking Authority (EBA) Board of Supervisors (BoS) are more explicitly “political” and policy-oriented, as well as wider-ranging, than those within the Supervisory Mechanism (SSM) Supervisory Board (SB). This difference reflects in turn the elusive distinction between regulation and supervision, whereby the EBA is formally responsible for drafting binding regulatory standards and “soft law” guidelines on interpretation of EU legislation, while the European Central Bank (ECB)/SSM, like National Competent Authorities (NCAs) outside the Banking Union, is responsible for their implementation in supervising individual credit institutions
These supervisory quality assurance activities can be understood as an experimentalist form of dynamic, forward-looking accountability, in which officials are expected to explain how they have used their discretion within a given framework to advance the institution’s goals, 15 Following the October 2020 reorganization of ECB Banking Supervision, whereby Supervisory Quality Assurance (SQA) was integrated into a new Strategic Supervisory Risk Directorate, it is envisaged that this function should contribute more directly to the formulation and implementation of the SSM’s strategic priorities through a combination of ex-ante and expost reviews, though the precise modalities through which this will work remain in the design phase (ECB 9.1; ECB 9.2)
Summary
How can advances in European integration be reconciled with diversity among Member States? Rightly or wrongly, EU regulation has acquired an increasingly contested reputation, at least within the Union itself, where the “Brussels rule factory” has become a term of abuse even among committed supporters of the European project (e.g. van Middelaar 2019). In the EU context, such penalty defaults frequently involve court judgments or (threats of) Commission decisions, which oblige Member States and/or private actors to explore how to pursue their own preferred goals in ways compatible with the fundamental principles of European law, but without imposing specific hierarchical solutions (Sabel & Zeitlin 2008: 305–8, 2010: 13–16, 2012: 413–14; Zeitlin 2016: 3–4; Gerstenberg 2019; Svietiev 2020) Such XG architectures arguably have a number of fundamental advantages, relative both to conventional uniform regulation and to differentiated integration. They accommodate diversity by adapting common goals and rules to varied local contexts, rather than seeking to impose one-size-fits-all solutions or dividing Member States into separate groups of “Ins” and “Outs”. In such a simplified architecture, framework rules and procedures may be progressively specified and discretion for lower-level actors at any given moment narrowed, but the rules and procedures themselves remain contestable in light of local application, while revisions over time based on recursive review of implementation experience provide a crucial source of improvement and adaptability for the governance system as a whole (Zeitlin 2016; Rangoni 2020)
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