Financial services law can be understood as the normative framework that governs the financial sector. Based on the activities carried out, the financial sector, in turn, has been traditionally subdivided into three sub-sectors, namely banking, securities, and insurance. Thus, financial services law has accordingly been divided into banking law, securities (or capital markets) law and insurance law. In this chapter we discuss first the legal meaning of financial services law, financial services, financial products, financial intermediaries, and financial markets. We then analyse the rationale of regulation, focusing on financial stability, depositor and investor protection, market efficiency and transparency, prevention of financial crime and fraud as well as competition. The chapter also considers the internationalization of financial institutions and services and their liberalization and how the latter interacts with prudential supervision. In doing so, this chapter looks at GATS provisions and other trade agreements and concludes with a discussion of the law-making process at the international level, with particular attention to soft law.
Even though the bail-in tool is potentially helpful in resolving banks in crisis, it may still create the same issues that resolution is meant to prevent and/or avoid, namely contagion, financial instability and also systemic risk. Recent cases of bank restructuring have demonstrated that there are situations in which the use of the bail-in tool could end up being dangerous for the stability of the financial system. Obviously in such cases, the write down and/or conversion into equity of the bank’s liabilities must be avoided. At the same time, however, the disapplication of bail-in makes the provision of external resources necessary to rescue effectively the bank in crisis.The EU legislator was aware of these potential issues and for this reason introduced a number of rules allowing, in certain situations, both the disapplication of the bail-in tool and the provision of external financing. Nevertheless, when the provision of external financing comes from the Member States, it has to comply with the rules of the State aid framework set by the Treaty on the Functioning of the European Union (TFEU) and applied by the European Commission. In this article, it is argued that despite the strict rules on State aid, there is still room to manage even difficult banking crisis situations in which the application of the bail-in tool could be counterproductive and therefore public intervention should take place through the so-called precautionary recapitalisation instead. However, in this regard, it is crucially important that the authorities intervene before the bank in trouble ‘crosses the line’ of insolvency, as some recent cases of Greek and Italian banks have demonstrated.
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