Governing Financial Stability : A study of the Pre-Crisis Regulatory Regime in the Eurozone

The financial crisis that began in 2007 and gained global momentum in the autumn of 2008 shed light on the consequences of faulty regulation and weak supervision of the financial sector. The European sovereign debt crisis that followed made it even more obvious. Financial regulation is ultimately about politics, which is the departure of this study. This thesis examines the role of ideas, interest and institutions in shaping the pre-crisis regulatory regime in the Economic and Monetary Union (EMU). The thesis finds that the institutional arrangements for policy-making in the EMU, allowed for expert committees and interest groups to exercise influence on regulatory policies. The narrow policy community, confined to a mixture of financial sector interests and certain economic ideas, seems to have contributed to a biased regulatory philosophy. To some extent, the analysis demonstrates how this regulatory philosophy created a micro-oriented regulatory regime in the EMU that to a limited extent addressed system-level risk arising from European financial integration