European Union Financial Regulation, Banking Union, Capital Markets Union and the UK

The European Union (EU) undertook major reforms of its economic and finan– cial governance framework after the international financial crisis and the sover– eign debt crisis (for an overview, see Journal of Common Market Studies 2009; Review of International Political Economy 2015; and Journal of European Public Policy 2015). Three financial policy areas stand out: financial regulation, which was significantly revised in the wake of the international financial crisis; Banking Union (BU), which was the EU (to be precise, the euro area)’s response to the sovereign debt crisis; and Capital Markets Union (CMU), which was the EU’s attempt to re- vamp financial activities and the real economy after two consecutive crises. These reforms were complex and intertwined. They built on the existing EU framework, notably the Single Financial Market in the case of financial regulation and CMU. The reforms enacted also substantially modified the existing framework, as in the case of BU, which was designed to complete Economic and Monetary Union (EMU).

This paper examines the dynamics of EU reforms in these policy areas by focusing on the preferences and influence of the United Kingdom (UK). The UK has often been considered as an ‘awkward partner’ in the EU. Stephen George’s classic book, An Awkward Partner: Britain in the European Community (1990), points out the troubled relationship of the UK with the process of European integration since its inception. This paper argues that this view is somewhat unwarranted, especially in the case of financial policies. In these policies the UK has been a foot-dragger, a fence-sitter and a pace-setter, depending on the circumstances. The paper does not discuss in-depth the (often complex) intra-EU negotiations in these policy ar- eas. At the same time, the domestic politics and political economy of these issues in the UK are not investigated in details. The aim of the paper is to explore how the EU policy-process and the domestic arena in the UK interacted and with what outcome. The material is organised as follows. Section 2 discusses some concepts that can be useful in order to examine the preferences and the influence of the member states in the EU policy-process. The empirical sections follow by and large a chronological order, discussing EU financial regulation first (Section 3), then BU (Section 4) and finally CMU (Section 5). 

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