EU Capital Research Articles

EU Capital Markets Union: an alluring opportunity or a blind alley? Concept and micro-perspectives of CMUs

EU Capital Markets Union: an alluring opportunity or a blind alley? Concept and micro-perspectives of CMUs

Ordoliberalism Beyond Borders:The EU and Algeria's Human Capital

This working paper studies the Euro-Algerian relationship through the lens of investment in human capital and looks at how European interventions encourage the transformation of Algerian governmentality. In addition to the various policies implemented since the signing of the Association agreement in 2002, the article also interrogates the agendas of local institutions and actors who support or resist this transformative influence. After an introductory section that presents the concept of human capital and its relevance for the Euro-Algerian context, the following sections show how the Euro-Algerian cooperation draws on technologies of standardization, securitization and responsibilization in order to shape a socially integrated, politically and economically moral subject. This empirical analysis serves to understand the ordoliberal character of this intervention. Indeed, the goal of the European Union is not merely to propose a technical intervention in order to promote a stable environment for the modernization of the economy. Instead, the shaping of Algeria's human resources, with the support of diverse segments of the ruling elite, shows the depth of a restructuring that is also political. The relationship between the nation-state and its population is thus affected, as the former is associated with an anthropological process that must foster both economic efficiency and civic awareness.

Prudent Valuation Guidelines and Sound Practices

The EU Capital Requirement Regulation (CRR) and the EBA Regulatory Technical Standard for prudent valuation, published on Jan. 1st, 2014 and Jan. 28th, 2016, respectively, constitute the EU Prudent Valuation Framework, which represents a challenge for financial institutions both from a methodological and practical point of view. In this work we seek an ambitious fourfold result. First, we work out a practical realization of the regulatory requests, smoothing the difficulties arising from the detailed interpretation of the rules. Second, we give a comprehensive methodological analysis of the different sources of valuation risk (ambiguity, liquidity, correlation, concentration and model risks) that bring about the need of computing valuation adjustments. Third, we explore a wide range of possible individual AVA calculation approaches, providing many practical case studies mimicking the actual valuation scenarios that institutions might face. Finally, we design a comprehensive example of the entire Prudent Valuation process, covering both organizational and IT issues. This work provides a set of guidelines and sound practices that could be used as a starting point and, possibly, a benchmark for prudent valuation. On the one side, institutions will benefit of the rules explained and applied into a variety of case studies. On the other side, regulators will benefit to see how the rules are interpreted and applied by institutions. We do not aim either to give any authentic interpretation of the regulations, which ultimately belongs to its owners, or to question the principles behind the regulations, since real challenges may come out only from practical applications of the principles to real financial portfolios, and comparisons across different financial institutions.This work is the result of the joint effort of the Market Risk Committee of AIFIRM - Italian Association of Financial Industry Risk Managers.

European Shareholder Rights Directive proposals: a critical analysis in mapping with the UK Stewardship Code?

The proposed amendments to the EU Shareholders’ Rights Directive purport to improve shareholder rights and powers in investee companies. In general, these initiatives provide minority shareholders with confidence in corporate governance and could be useful as a supply-side stimulating measure to encourage investor interest in pan-European equity markets, therefore contributing to the much-needed European initiative to develop deep and liquid capital markets in order to provide corporate finance. (For example, the EU Capital Markets Union initiative.) This paper focuses on the Articles that purport to develop ‘shareholder stewardship’ on the part of institutional shareholders. The Articles seem to be derived from the UK Stewardship Code, which legitimises and encourages active corporate governance roles for shareholders, therefore boosting their corporate governance rights. However, this paper critically questions that apparent resemblance, and argues that the Articles borrow the cloak of the stewardship concept to introduce regulatory measures for investment management practice, and the purpose and function of these Articles may not accord with the essential ‘corporate governance’ paradigm that Directive is framed in.

THE PATH-DEPENDENT NATURE OF URBAN GOVERNANCE: EMERGING MODES IN FINLAND AND ITALY

The socio-economic changes and the territorial reorganisation they imply (new productive districts, new emerging regional economies, etc) together with the processes of political and administrative reform bring about a deeper process of rescaling strongly affecting European urban societies since the end of the 70s. Among the main consequences we find the processes of welfare state reform towards new forms of local welfare arrangements characterised by the rhetoric of activation policies. Cities are now increasingly the main actor in the design of new welfare policies within the broader context of the reconfiguration of urban governance. The aim of the paper is to investigate the modes of urban governance emerging from the reform process common to most EU countries. My hypothesis is that there is a relationship between urban governance modes and welfare regimes. The analysis of urban welfare modes of governance in two EU capitals, Helsinki and Rome bring to light the role of local institutional milieus in shaping modes of governance. Although there are common challenges and a common response toward an increasing neoliberal role of activation policies, local institutional milieus have played a crucial role in defining a path-dependant process of reform. In social democratic welfare regimes a managerial mode of governance has emerged, stressing the central role of the State. In the familistic welfare regime, the consolidated role of third sector organizations and the non-structured and fragmented position of local public authorities in welfare policies has shaped a mode of clientelistic and corporatist governance.

“High Quality Securitisation and EU Capital Markets Union – Is it Possible?”

AbstractThe resurrection of the securitisation market lies at the heart of the recent EU project to build a pan-European capital markets union (CMU). This is in line with the existing policy goal to expand market-based, disintermediated financing channels, which has been ongoing since the 1980s. Initial efforts to restart the moribund securitisation market in Europe have been carried out through a number of public consultations which have more recently converged towards the Commission’s proposal for a Regulation laying down the rules to create a European framework for Simple, Transparent and Standardised (STS) securitisation. This article provides a critical perspective on the EU project to create a capital market union and in particular on the proposed framework for STS securitisation. The critique is firstly centred on the problematic coordination of the different policy objectives, which emerged from the consultations’ responses. Secondly, it points to four specific areas of concern, namely, the difficulty to define securitisation for the purpose of the regulation, the dangers of linkages with the shadow banking system, the unresolved reliance on external ratings, and the question of STS supervision. It is argued in this article that the persistence of these problems in the current design leads to questioning whether a revived securitisation market would still fuel the shadow banking system and create systemic risks. It is pointed out that the difficulty to regulate complex legal relationships typical of long intermediation chains – such as tranched securitisation – makes the proposed framework still weak. This article submits that only a tighter approach to transaction standardisation could ensure the simplicity and transparency that the Commission is hoping to achieve. Equally, a supervisory infrastructure centred on the overseeing power of a pan-European authority is needed to prevent pre-crisis legal problems from recurring.

Macro‐regional integration, the frontiers of capital and the externalisation of economic governance

This paper examines the role of macro‐regional integration in the European Union's interactions with its ‘southern neighbours’ within the context of the aftermath of the ‘Arab Spring’. It focuses on attempts to deepen trade liberalisation and create a new institutional architecture as a state‐mediated project of macro‐regional political‐economic integration. Drawing on interviews with key institutional actors, policymakers and strategists, the paper examines the Tunisian case to highlight how the interests of international states and fractions of EU capital are being forged through new institutional and policy architectures in the Euro‐Mediterranean region. The paper extends geographical research on the EU's relations with its neighbourhood and political science research on ‘Europeanisation’, both of which have primarily focused on the geo‐political dynamics of macro‐regional integration, on geo‐political imaginations of the region and on the ‘normative power’ of the EU. It does so by examining the ways in which the EU is attempting to externalise its economic space beyond its borders through the negotiation of Deep and Comprehensive Free Trade Agreements and Agreements on Conformity and Acceptance of industrial products. It also highlights the contested nature of this process in relation to the complex politics of transformation in the southern Mediterranean. In doing so, the paper contributes to understanding of the reconfiguration of border spaces by exploring the tensions between the frontiers of capital accumulation and political‐juridical boundaries.

EU Capital Markets Union: the good, the bad and the ugly

This article broadly contextualises Capital Markets Union (CMU) in the Europe Union and introduces the three substantive articles that make up this symposium. The articles contain much substantive information, not only on the European Commission's public consultation in 2015 but also on trade responses to the consultation. Besides that, Kern Alexander, Ismail Ertürk and Dieter Pesendorfer offer some contrasting perspectives on CMU, suggesting respectively that it is along the right lines; that it needs better calibrating to the EU; and that it misses the opportunity to transform finance. The European Commission's further proposals, including legislation, flow from late 2015 onwards.

High Quality Securitisation and EU Capital Markets Union Is it Possible?

The resurrection of the securitisation market lies at the heart of the recent EU project to build a pan-European capital markets union (CMU). This is in line with the existing policy goal to expand market-based, disintermediated financing channels, which has been ongoing since the 1980s. Initial efforts to restart the moribund securitisation market in Europe have been carried out through a number of public consultations which have more recently converged towards the Commission’s proposal for a Regulation laying down the rules to create a European framework for Simple, Transparent and Standardised (STS) securitisation.This article provides a critical perspective on the EU project to create a capital market union and in particular on the proposed framework for STS securitisation. The critique is firstly centred on the problematic coordination of the different policy objectives, which emerged from the consultations’ responses. Secondly, it points to four specific areas of concern, namely, the difficulty to define securitisation for the purpose of the regulation, the dangers of linkages with the shadow banking system, the unresolved reliance on external ratings, and the question of STS supervision.It is argued in this article that the persistence of these problems in the current design leads to questioning whether a revived securitisation market would still fuel the shadow banking system and create systemic risks. It is pointed out that the difficulty to regulate complex legal relationships typical of long intermediation chains – such as tranched securitisation – make the proposed framework still weak. This article submits that only a tighter approach to transaction standardisation could ensure the simplicity and transparency that the Commission is hoping to achieve. Equally, a supervisory infrastructure centred on the overseeing power of a pan-European authority is needed to prevent pre-crisis legal problems from recurring.

Deconstruction and Reconstruction of the “Comply or Explain” Principle in EU Capital Markets

AbstractThe “comply or explain” principle has already acquired significant importance in corporate law and regulations and is considered to be the preferred regulatory tool in the EU for increasing transparency and disclosure of market participants’ strategies and activities. The flexibility of the principle is perceived as the most suitable way to create indirect coordination of practices amongst market actors, as well as better mutual understanding of their different priorities. Having initially shown its considerable appeal in the area of corporate governance statements issued by corporate entities, it has now expanded its influence into other areas serving similar transparency imperatives, such as the exercise of stewardship responsibilities by institutional investors and proxy advisors. In this paper, we will focus on the merits and shortfalls of the “comply or explain” principle in all the above-mentioned areas, both at national and at EU levels, and will critically challenge its effectiveness in the current regulatory framework. Moreover, we will seek to justify its continued use by demonstrating its future potential role as a veritable dialogue spectrum between different market participants. Lastly, we will emphasise the need for a soft monitoring process from national regulators which will enable both the “comply or explain” principle and its users to participate in a holistic effort for the adoption of sound investment strategies via the fruitful exchange of views and ideas and better communication with regard to their respective role in capital markets.

The competitiveness of Brussels in European research

What is the place of Brussels in the European research geography? Brussels is commonly recognised as the EU capital, but mainly for its political and administrative functions. As research is fundamental in a “knowledge-based economy”, this paper shows the performance of Brussels in terms of participation in EU R&D projects. Findings show a double role for Brussels: i) Belgian stakeholders perform well in the competition for R&D calls; ii) EU-related stakeholders contribute by establishing research networks, making Brussels the “capital of the European Research Area”. The analysis is based on an innovative database of participation in Framework Programme projects from 1999 to 2010.

EU Finance Ministers, Capital Markets and Fiscal Outcomes

We investigate the relevance of the characteristics of Ministers of Finance as an influence on the development of stock returns, sovereign yields and fiscal outcomes, which result from the implementation of their fiscal policies. For a panel of 27 EU countries, covering the period of 1980-2012, we find that academic background, tenure and gender, play a role in determining stock and bond market returns, as well as the general fiscal position of governments. JEL: G10, G12, H30, H62.

Addiction treatment in deprived urban areas in EU countries: Accessibility of care for people from socially marginalized groups

Aim: This study examines the accessibility of addiction treatment within services providing mental health care and support for people from socially marginalized groups in deprived urban areas across EU countries.Methods: Services providing mental health care and support in deprived areas of 14 EU capital cities were assessed with a questionnaire. We analysed the availability and accessibility of those services providing addiction treatment for people from six groups: the long-term unemployed, the homeless, street sex workers, asylum seekers and refugees, irregular migrants and people from travelling communities.Results: While 30% of all the assessed services provided addiction treatment, in 20% of services, addiction was a criterion for exclusion. Among services providing addiction treatment, 77% accepted self-referrals, 63% were open on weekends or in the evening, 60% did not charge any out-of-pocket fees, 35% provided access to interpreters, and 28% ran outreach activities. These results varied substantially among EU capitals.Conclusion: Access to addiction treatment for socially marginalized groups varies across Europe. Some of the models identified may constitute barriers to treatment. Developing care delivery models that facilitate access for vulnerable populations should be a priority for national and European policies.

Time to Set Banking Regulation Right

Excessive leverage and risk-taking by large international banks were the main causes of the 2008-09 financial crisis and the ensuing sharp drop in economic activity and employment. World leaders and central bankers promised that it would not happen again and, to this end, undertook to overhaul banking regulation, first and foremost by rectifying Basel prudential rules. This study argues that the new Basel III Accord and the ensuing EU Capital Requirements Directive IV fail to correct the two main shortcomings of international prudential rules: 1) reliance on banks’ risk management models for the calculation of capital requirements and 2) the lack of accountability by supervisors. Accordingly, the authors propose the calculation of capital requirements without risk adjustment and creation of a system of mandated action by supervisors modelled on the US framework of Prompt Corrective Action (PCA). They also recommend that banks should be required to issue large amounts of debentures that are convertible into equity in order to strengthen market discipline on management and shareholders.

The Financial Assistance Prohibition: Origins, Evolution, and Future

Article 23 of the - revised - EU Capital Directive permits Member States to allow public companies to make loans or provide security to third parties to have them acquire shares in the company, if certain conditions are met. This contribution places these financial assistance rules within its historical perspective and sets out recent developments in certain jurisdictions, ending with a discussion of expected developments.

Royal delicacies at peasant prices: cross-national differences, common grounds – towards an empirically supported theory of the informal economic activities of migrants

Turkish groceries and fast food restaurants, Chinese barbecues, Pakistani kiosks, Iranian pizzerias and carpet stores, Arabic kebab houses, erotic artists from Eastern Europe and Southeast Asia, exchange agencies across Denmark and many other EU countries, a growing number of wholesale businesses in the Copenhagen area and other EU capitals are all manifestations of contemporary immigrant entrepreneurship. The list could be easily extended as immigrants in many cities in the European Union, and in advanced economies in general, have set up their own businesses of various kinds. But what is the role and the impact of immigrant owned businesses, and what influence do they have on the welfare state, on living conditions of immigrants and natives and on the economy in general? Drawing on empirical evidence from cross-national studies we attempt to provide answers to these core issues, whilst developing conceptual foundations of a theoretical framework that can explain the phenomenon, enabling us to make more reliable predictions future development.

The Past Decade of Regulatory Change in the U.S. and EU Capital Market Regimes: An Evolution from National Interests toward International Harmonization with Emerging G-20 Leadership

The Past Decade of Regulatory Change in the U.S. and EU Capital Market Regimes: An Evolution from National Interests toward International Harmonization with Emerging G-20 Leadership

Media use at the crossroads: Nicosia

Cyprus has always been a crossroads between continental Europe and the Middle East and the history of migration from this region to the eastern Mediterranean island can be traced back more than two thousand years. Contemporary migration has had its distinct history with significant waves of refugees migrating from the Middle East to Cyprus since the 1960s. In these recent times, Lebanese and Palestinians have become the two largest groups of migrants to Cyprus. In addition, since the turn of the 21st century and with the growth of the Cypriot economy, smaller waves of economic migrants from the Middle East and Northern Africa have moved to Cyprus. Although Arabic migration spreads across the island, an established Arab community sustains a strong and longstanding presence in Nicosia, the capital. For this study we recruited individuals from different social and ethnic backgrounds, including Middle Eastern migrants and Cypriotborn migrants from locations such as Lebanon and Palestine especially, but also newcomers from the Gulf region and North Africa. This article is based on six focus groups of three different age groups (three female and three male; age groups: 18?25, 26?45, 46+) conducted in Nicosia, Cyprus, in June 2009. Each focus group included between six and eight participants of various Arabic backgrounds. The Nicosia focus groups have tended to reflect the distinct cultural position Arab participants occupy in contemporary South Eastern Europe (i.e. being primarily refugees living close to the Middle East). Thus, the focus groups revealed a number of distinct characteristics compared to the focus groups in other countries included in the Media and Citizenship study. Most importantly, among the Nicosia participants, we observed more participants identifying as cosmopolitan subjects compared to any other group studied in the seven EU capitals. In addition, a significant number of participants described diverse and rich media practices, which construct multilingual media worlds that include media in various European languages, as well as Arabic national and transnational media.

Media and citizenship: Transnational television cultures reshaping political identities in the European Union

The EU-funded project entitled Media and Citizenship: Transnational Television Cultures Reshaping Political Identities in Europe provides the first empirical study of viewing of Arabic language television in Europe. These seven papers report on focus groups in seven EU capitals in which Arabic speakers discuss their citizenship in the light of their media use and their adopted national cultures.

Event risk—Parametrization and estimation in a generalized Pareto model with time-varying thresholds

The EU Capital Requirements Directives, which is the European implementation of the Basel II Accord, became effective in 2007. Since then, credit institutions have had to run their risk measurement...