Rowman and Littlefield International
Widen the Market, Narrow the Competition

Widen the Market, Narrow the Competition

Banker Interests and the Making of a European Capital Market

By Daniel Mügge

Publication Date: Sep 2010

Pages 190

ECPR Press

Paperback 9781907301087
£30.00 €41.00 $46.00

EU capital markets have changed radically over the past 20 years. In the 1980s, countries had their own financial industries and rules. Now there is one 'Champions League' of banks, and member states have transferred crucial regulatory powers to Brussels. Drawing on policy documents and more than fifty in-depth interviews, Widen the Market, Narrow the Competition argues that financial industry interests have been key to this power shift. Continental banks initially feared a single European market, and governments followed their protectionist impulses. In the 1990s the mood changed, and the likes of ABN AMRO and Deutsche Bank rushed into international investment banking. They emerged as the crucial lobby for the supranational governance in place today. Linked by the interests of centrally placed firms, EU financial integration and supranational governance have been two sides of the same coin. At the same time, national parliaments and ordinary citizens have been pushed to the sidelines.

contents

List of Figures and Tables viii

Chapter One: Introduction 1

Established Approaches and their Limits 3

The Argument: Banker Interests in EU Capital Markets 7

Chapter Two: Competition Politics and Supranational Integration 13

European Integration 13

Financial Market Liberalisation and Regulation 18

Private and Public Actors in Regulatory Policy 22

The Competition Politics Approach 25

The Core Features of the Approach 29

Chapter Three: The Domestic Roots of Regulatory Reform 31

European Capital Markets at the End of the 1980s 32

Regulatory Reform in German Managed Capitalism 35

Regulatory Reform in French State-led Capitalism 40

Regulatory Reform in British Market Capitalism 44

European State-market Condominiums in Comparison 49

Chapter Four: Negotiating the Single Market 51

Financial Services in the Single Market Project 52

Negotiating a European Market in Investment Services 58

Competitive Fault Lines and

Intergovernmental Politics 67

Chapter Five: The 1990s’ Capital Market Revolution in Europe 69

Measuring Change in EU Investment Banking Markets 70

Market Concentration as a Source of Economic

and Political Power 72

The Rise of Capital Markets and Investment

Banking in Europe 74

Explaining Internationalisation 80

European Bourses: From Members-only Clubs to

Profi t-Seeking Firms 88

Chapter Six: The Re-launch of Financial Market Integration 93

Shifting Industry Preferences in the 1990s 94

The Emergence of EU-level Lobbying 98

EU Action and Industry-Commission Contacts

Ahead of the FSAP 102

The FSAP, the ISD and the Forum Groups 106

Chapter Seven: The Emergence of Supranational Governance 109

Supranational Cooperation before Lamfalussy 110

viii widen the market, narrow the competition

Launching Institutional Change 111

Negotiating Lamfalussy 113

Supranational Governance in Practice 120

Industry Interests and Institutional Reform 122

Chapter Eight: Renegotiating the ISD in the Supranational Constellation 125

European Lobbying Transformed 126

Lamfalussy in Action: Renegotiating the ISD 133

Clearing and Settlement: the Persistence of

National Competition Politics 139

The supranational constellation in EU capital market governance 141

Chapter Nine: Conclusion 143

Banker Interests in EU Capital Market Integration 143

EU Capital Market Governance and The Crisis 148

Governing Finance in the Interest of All? 151

Appendices 155

Overview of the International Expansion of European Banks 155

References 159

List of Interviews 176

Index 179

LIST OF FIGURES AND TABLES

Figures

Figure 2.1: Actors and the political economy environment they confront

and shape 25

Figure 2.2: A schematic depiction of EU fi nancial market structuration 28

Figure 3.1: Financial structures in 1991 32

Figure 3.2: Economic relevance of fi nancial sectors in 1985 34

Figure 5.1: The stock market boom 74

Figure 5.2: Germany: fi nancial structure 76

Figure 5.3: France: fi nancial structure 76

Figure 5.4: UK: fi nancial structure 76

Figure 5.5: Securitisation of large commercial bank business 82

Figure 5.6: Comparing large commercial banks with banks in general,

Germany 82

Tables

Table 3.1: Financial systems and their embeddedness compared 50

Table 6.1: Hypothetical policy preferences of fi rms 95

ince August 2008, Daniel Mügge has been Assistant Professor in International Relations and International Political Economy at the University of Amsterdam. In 2002, he was awarded an MA in International Relations (with honours) at the International School for Humanities and Social Sciences (ISHSS), University of Amsterdam.

In September 2008, he defended his dissertation
Widen the Market, Narrow the Competition: The Emergence of Supranational Governance in EU Capital Markets with a committee composed of Prof GRD Underhill (advisor), Dr BM Burgoon, Prof GCA Junne, Prof SP Lütz, and Prof JHF Story.

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