The Law and Structure of the International Financial System: Regulation in the United States, EEC, and Japan

By John H. Friedland | Go to book overview

important as firms are governed by different capital adequacy regimes for their investment and trading books.

It is apparent that valid international agreements in the area of financial regulation involve the loss of national sovereignty. As the chairman of the SIB concludes, "The areas in which national regulators can act wholly independent of each other is being rapidly eroded by technology and other market developments." 319 This observation is also true with regard to national insolvency proceedings insofar as market charges are concerned. Within the EEC, the continued role of SROs and their Conduct of Business Rules (CBRS) will hamper the creation of a single market by prolonging disparate regulatory regimes and marketplaces. While CBRs are bound to be culturally sensitive and difficult to directly incorporate into statutory law, harmonization of CBRs is a sine qua non of a successful single market.

Financial liberalization in Europe is part of a global movement. The geometric increase in complexity of world financial markets receives divergent reviews as to its effects on financial market volatility--different organs within Bank for International Settlements reach opposite conclusions. 320 Nonetheless, this increase and the growing interdependence of global markets necessitates increased coordination of securities and monetary authorities and enhances the case for EEC and global regulation.


NOTES
1.
The principal directives relating to Eurofinancial Integration are the Consolidated Supervision of Financial Institutions (see infra note 267), the Second Banking Directive (O.J. Eur. Comm. L.386, p. 1, et seq.), the Own Funds Directive (O.J. Eur. Comm. L.124, p. 16 89/299/EEC) and the Solvency Ratio Directive (O.J. Eur. Comm. L.386, p. 14 [ 1989]); the Investment Services Directive (see infra note 137) and its corollary, the Capital Adequacy Directive (see infra note 226). See also the Mutual Recognition of Prospectus Requirements (see infra note 189) and Mutual Recognition of Listing Particulars (see infra notes 187 and 188). The Second Banking Directive (SBD) and the Investment Services Directive (ISD) are the core of the Single Market in Financial Services. Liberalization in the insurance sector has not kept pace with that in the financial sectors. The Second Non-Life Directive (87/357/EEC, 31 O.J. Eur. Comm. [No. L. 172] [ 1988]) and the Second Life Directive (Comm [88] 729 Final [ December 23, 1988]) did not provide for communitywide branching. The Second Non-Life Directive enabled a single market in insurance (see Sydney Key, "Financial Integration in the European Community," Federal Reserve Board of Governors, International Discussion Paper No. 349, pp. 120, 123-24 [ 1989]), while the Life-Directive affected only those customers who take the initiative (Proposed Second Life Directive, Com (88) 729 Final, supra this note, Article 13).

The Third Directive on Life Assurance 92/96 EEC ( November 1992), which amends the Second Life Directive and the Third Directive on Non-Life Assurance 92/96 EEC ( June 1992), which amends the Second Non-Life Directive establish the right of communitywide branching for assurance undertakings whose head office

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