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The Transnational Financial Industry and the Politics of the Capital Market Union in the EU

Giuseppe Montalbano

Aim of the proposed paper is to investigate the role of cross-border investment banks, hedge funds and other key financial actors in the emergence and development of the plan for a Capital Market Union (CMU) in the EU. My argument is that the interests of transnational financial market incumbents have been the main determinants of the Commission initiative on a new round of liberalization in the European financial markets after the global financial crisis. As I will try to show, the CMU plan would respond to key interests of the cross-border European financial industry along multiple dimensions. The CMU would open windows of opportunity for relaxing and watering down some of the most burdensome regulatory measures implemented with the Capital requirements and MiFID II legislations. At the same time, it would engender a revamp of the securitisation markets throughout Europe, the dismantling of barriers to cross-border investment flows and the further regulatory harmonization in the Single market in financial services. According to a Critical IPE approach, I will identify in the politics of competition among EU- and domestic-oriented financial firms the underlying causal factor to explain the main motives at stake in the CMU plan. In order to analyse the influence exerted by financial market incumbents, I will focus on their relationship with the European Commission, as crucial institutional entrepreneur in fostering the integration of the European financial markets. Building on a historical-institutionalist conceptual framework, I will show how the Commission managed to mediate the key demands from the transnational financial industry, by elevating the CMU as cornerstone of a general recovery plan for promoting growth and investments in the wake of the enduring recession at the EU level.

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