Lamfalussy process
Encyclopedia
The Lamfalussy Process is an approach to the development of financial service industry
regulations used by the European Union
. Originally developed in March 2001, the process is named after the chair of the EU advisory committee that created it, Alexandre Lamfalussy
. It is composed of four "levels," each focusing on a specific stage of the implementation of legislation
.
At the first level, the European Parliament
and Council of the European Union
adopt a piece of legislation, establishing the core values of a law and building guidelines on its implementation. The law then progresses to the second level, where sector-specific committees and regulators advise on technical details, then bring it to a vote in front of member-state representatives. At the third level, national regulators work on coordinating new regulations with other nations. The fourth level involves compliance and enforcement of the new rules and laws.
A very significant European directive developed according to this approach is the Markets in Financial Instruments Directive, or MiFID
.
The Lamfalussy Process is intended to provide several benefits over traditional lawmaking, including more-consistent interpretation, convergence in national supervisory practices, and a general boost in the quality of legislation on financial services.
Nevertheless, the Lamfalussy Process has provoked controversy as it allows some element of bypassing accountable oversight by the Council of the European Union
and the elected European Parliament
, thereby embodying a further move away from representative democracy
towards technocracy.
The creation of the EU Authorities
(ESMA, EIOPA and EBA), which took over from the Advisory Committees on 1 January 2011, has resulted in some changes regarding how the four level legislative procedure operates, with the EU Authorities
being given a greater role and more powers.
Financial services
Financial services refer to services provided by the finance industry. The finance industry encompasses a broad range of organizations that deal with the management of money. Among these organizations are credit unions, banks, credit card companies, insurance companies, consumer finance companies,...
regulations used by the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
. Originally developed in March 2001, the process is named after the chair of the EU advisory committee that created it, Alexandre Lamfalussy
Alexandre Lamfalussy
Baron Alexandre Lamfalussy , is a European economist and central banker.Born in Hungary, Lamfalussy studied at the Catholic University of Leuven and Nuffield College, Oxford, where he received his doctorate in economics...
. It is composed of four "levels," each focusing on a specific stage of the implementation of legislation
Legislation
Legislation is law which has been promulgated by a legislature or other governing body, or the process of making it...
.
At the first level, the European Parliament
European Parliament
The European Parliament is the directly elected parliamentary institution of the European Union . Together with the Council of the European Union and the Commission, it exercises the legislative function of the EU and it has been described as one of the most powerful legislatures in the world...
and Council of the European Union
Council of the European Union
The Council of the European Union is the institution in the legislature of the European Union representing the executives of member states, the other legislative body being the European Parliament. The Council is composed of twenty-seven national ministers...
adopt a piece of legislation, establishing the core values of a law and building guidelines on its implementation. The law then progresses to the second level, where sector-specific committees and regulators advise on technical details, then bring it to a vote in front of member-state representatives. At the third level, national regulators work on coordinating new regulations with other nations. The fourth level involves compliance and enforcement of the new rules and laws.
A very significant European directive developed according to this approach is the Markets in Financial Instruments Directive, or MiFID
MiFID
The Markets in Financial Instruments Directive as subsequently amended is a European Union law that provides harmonised regulation for investment services across the 30 member states of the European Economic Area...
.
The Lamfalussy Process is intended to provide several benefits over traditional lawmaking, including more-consistent interpretation, convergence in national supervisory practices, and a general boost in the quality of legislation on financial services.
Nevertheless, the Lamfalussy Process has provoked controversy as it allows some element of bypassing accountable oversight by the Council of the European Union
Council of the European Union
The Council of the European Union is the institution in the legislature of the European Union representing the executives of member states, the other legislative body being the European Parliament. The Council is composed of twenty-seven national ministers...
and the elected European Parliament
European Parliament
The European Parliament is the directly elected parliamentary institution of the European Union . Together with the Council of the European Union and the Commission, it exercises the legislative function of the EU and it has been described as one of the most powerful legislatures in the world...
, thereby embodying a further move away from representative democracy
Representative democracy
Representative democracy is a form of government founded on the principle of elected individuals representing the people, as opposed to autocracy and direct democracy...
towards technocracy.
The creation of the EU Authorities
European System of Financial Supervisors
The European System of Financial Supervisors is an institutional architecture of the EU's framework of financial supervision created in response to the financial crisis...
(ESMA, EIOPA and EBA), which took over from the Advisory Committees on 1 January 2011, has resulted in some changes regarding how the four level legislative procedure operates, with the EU Authorities
European System of Financial Supervisors
The European System of Financial Supervisors is an institutional architecture of the EU's framework of financial supervision created in response to the financial crisis...
being given a greater role and more powers.