European financial market regulation in the wake of the financial crisis: a functional approach

Speech at the CESL Conference 2010—The article contains a tour d’horizon through the changing regulatory landscape which shows that practically any part of the value chain of capital markets is subject or will be subject to a certain type of (new) state regulation. Thus, not only in theory, but also in practice, the ‘role of law’ in financial markets is of high(est) and increasing importance. In particular, the financial crisis has triggered a veritable flood of reform acts and legislative proposals rendering it extremely difficult for all stakeholders of financial markets legislation to keep pace with the latest developments. Against this background, the first section of the paper explores the theoretical und economic foundations of capital market regulation in general. The second section of the paper provides an outline of the recent legislative measures taken by the European Union that aim at fostering and regaining confidence in and efficiency of capital markets.