Twin Peaks for Europe: State-of-the-Art Financial Supervisory Consolidation (eBook)

Acknowledgments 6
Contents 8
Abbreviations 12
List of Figures 16
List of Tables 18
1 Introduction 19
References 25
Other Sources 25
2 Milestones of European Insurance Regulation 26
2.1 Three Generations of Insurance Directives 27
2.1.1 First Generation Insurance Directives 27
2.1.2 Second Generation Insurance Directives 28
2.1.3 Third Generation Insurance Directives 28
2.2 Solvency I 29
2.2.1 The Main Features of Solvency I 30
2.2.2 Shortcomings of Solvency I 31
2.2.3 Need for Modernization 33
2.3 Solvency II 34
2.3.1 Principal Stakeholders in the Solvency II Process 34
2.3.2 The Phases of the Solvency II Process 38
Learning Phase 39
Framework Directive Phase 41
Implementing Phase 43
Enforcement Phase 43
2.4 Legal Basis and Structure of the Solvency II Directive 44
2.4.1 Pillar 1 44
2.4.2 Pillar 2 46
2.4.3 Pillar 3 47
2.4.4 Roof 48
References 48
Case Law 49
Legislation 49
Other Sources 51
3 European Financial Services Legislation 55
3.1 Background 56
3.2 The Pre-Lisbon Lamfalussy Framework 59
3.2.1 Level 1: Framework Principles 60
3.2.2 Level 2: Implementing Measures 61
3.2.3 Level 3: Uniform Implementation 66
3.2.4 Level 4: Enforcement 66
3.2.5 Review of the Lamfalussy Process 68
3.3 Changes Brought by the Lisbon Treaty 68
3.3.1 Co-Decision Procedure Becomes Ordinary Legislative Procedure 69
3.3.2 Comitology Reform 69
New Legal Framework for Delegation of Powers 71
3.4 The de Larosière Reform 74
3.4.1 Flaws in the European Financial Supervisory Framework 77
3.4.2 The European System of Financial Supervision 78
The European Systemic Risk Board 78
The European Supervisory Authorities 80
3.5 The Post-Lisbon Lamfalussy Framework 81
3.5.1 Level 1: Framework Legislative Acts 83
3.5.2 Level 2: Non-Legislative Acts 83
3.5.3 Level 3: Uniform Implementation 86
3.5.4 Level 4: Enforcement 87
References 87
Case Law 87
Legislation 87
Other Sources 89
4 Insurance Groups and Their Supervision 92
4.1 Characteristics of Insurance Groups 94
4.1.1 Definition 94
4.1.2 Organizational Forms 98
Centralized Model 100
Decentralized Model 103
4.2 Group Supervision Under the Insurance Groups Directive 107
4.3 Group Supervision Under Solvency II 111
4.3.1 Pillar 1 Requirements 113
Valuation of Assets and Liabilities 113
Technical Provisions 114
Own Funds 115
Solo Solvency Capital Requirement 116
Minimum Capital Requirement 117
Investment Rules 118
Diversification 118
Group Solvency Capital Requirement 123
Risk Concentration and Intra-Group Transactions 124
4.3.2 Pillar 2 Requirements 127
Supervisory Authorities and General Rules 127
Responsibility of the Administrative, Management or Supervisory Body 129
System of Governance 130
Measures to Facilitate Group Supervision 132
4.3.3 Pillar 3 Requirements 135
References 135
Legislation 136
Other Sources 137
5 The Group Support Regime 140
5.1 Background 141
5.2 Introduction of the Rules 144
5.3 The Group Support Regime's Operation in Practice 160
5.3.1 Scenario 1: Breach of One Solo SCR 161
Case 1: Group Not Regulated Under the GSR 161
Case 2: Group Regulated Under the GSR 163
5.3.2 Scenario 2: Breach of One Solo MCR 164
Case 1: Group Not Regulated Under the GSR 164
Case 2: Group Regulated Under the GSR 166
5.3.3 Scenario 3: Breach of Consolidated Group SCR 168
Case 1: Group Not Regulated Under the GSR 168
Case 2: Group Regulated Under the GSR 170
5.3.4 Scenario 4: Breach of Minimum Consolidated Group SCR 172
Case 1: Group Not Regulated Under the GSR 172
Case 2: Group Regulated Under the GSR 174
5.4 Compromise Instead of Group Support Regime 175
5.5 The Way Forward 179
References 182
Legislation 182
Other Sources 183
6 Towards a Genuine Economic and Monetary Union 184
6.1 The Case for a Full Economic and Monetary Union 185
6.1.1 About Successful Monetary Unions 186
6.1.2 The Flaws of the Maastricht Architecture 191
6.2 Genuine Economic and Monetary Union 199
6.2.1 Integrated Financial Framework: Banking Union 200
6.2.2 Integrated Budgetary Framework: Fiscal Union 207
6.2.3 Integrated Economic Policy Framework: Economic Union 209
6.2.4 Democratic Legitimacy and Accountability: Political Union 210
References 211
Case Law 211
Legislation 211
Other Sources 213
7 Reform of the EU Financial Stability Framework 215
7.1 Financial Stability Frameworks Across the Globe 217
7.1.1 The Rationale for Financial Regulation 218
7.1.2 The Four Financial Supervisory Approaches 219
7.1.3 The Role of Central Banks in Financial Stability Frameworks 224
7.1.4 How Much Does Supervisory Structure Really Matter? 232
7.1.5 Integral Features of Successful Financial Stability Frameworks 234
7.2 The Current European Financial Stability Framework 236
7.3 Twin Peaks for Europe? 240
7.3.1 Reform Objectives, Policy Options, and Methodology 241
7.3.2 Analysis and Comparison of Policy Options 247
Objective 1: Establishment of a European Insurance and Securities Supervisor 247
Objective 2: Establishment of a European Insurance and Securities Resolution Authority 257
Objective 3: Establishment of a European Safety Net in the Insurance and Securities Sectors 263
7.3.3 Concluding Remarks on the Overall Design of the New Financial Stability Framework 268
References 269
Legislation 270
Other Sources 271
8 Conclusion 273