'Never Waste a Good Crisis': The Role of Policy Entrepreneurs in the European Commission in the 2009 Reforms for Financial Market Supervision

Up until the late 1990s financial market integration had lagged behind in the agenda of the European Union (EU). The 2007-2008 Global Financial Crisis opened a window for structural reform in the form of increased regulation and supervision of the financial markets at European and international level. This papers explores the role of policy entrepreneurs inside the European Commission and how they made use of the political window to push for the creation of the three European Supervisory Authorities (ESAs) on financial activities in 2009-2010. The paper uses the garbage can model for exploring the processes of decision-making and policy making. Empirically, the analysis is based on content analysis of framework policy and legislative documents between 1999 and 2011 and interviews with Brussels-based Commission staff, former Commissioners and policy experts on financial market supervision. A major feature of the garbage can model is the partial decoupling of the policy solution from the problem: the solution can pre-date the problem. The paper argues first that the solution put forward in the 2009 reforms to create the three ESAs existed prior to the crisis. Secondly, that the framing of the policy solution shaped the understanding of the problem of lack of cross-border supervision in the EU as a problem of lack of enforcement of an existing framework rather than the need for structural reform after the Global Financial Crisis. And thirdly, that policy entrepreneurs within the European Commission were essential actors in putting the reforms on the political agenda. The results suggest that the reforms on financial market supervision in the EU in 2009 aimed at consolidating existing supervisory frameworks according to beliefs that existed before the crisis. Rather than a transfer of powers from the national to the European level, it is a horizontal reinforcement of supervision at the European level as well as a deepening of the role of the national supervisory authorities that has taken place. The result is an increased number of entities involved at European level and a larger network of actors in supervision of financial activities, notably on cross-border supervision.