Which effects condition the potency of governance ideas? This paper sets out to answer this question for the case of common supervision for Central Counter-Parties (CCPs) in the European Union. These entities gained a crucial importance post-crisis due to new regulation which requires the clearing of standardized derivative contracts. While the EU enacted a new EU wide regulatory framework in 2012 (EMIR), CCPs are up to date subject to decentralized national supervision, while being subject to these common European rules. Therefore, the regulatory reform to stabilize the OTC derivatives market replicated at its center a governance flaw, which had been identified as one of the major causes for the gravity of the financial crisis in the EU: the coupling of intense competition based on private risk management systems with the national supervision of European rules. While the problematic nature of this supervisory structure was known to policy makers in Europe long before the crisis, at least from 1999 onwards, ideational and material obstacles prevented action on these concerns. This paper traces the history of this problem awareness and inquires which factors account for the fact that only in 2017 serious negotiations at the EU level ensued that envisioned a common supervision of CCPs to fix the flawed system of governance. We show how an initially limited problem awareness coupled with the limited size gives way to more acute concerns by 2010, which however remain impotent due to opposition to European supervision at the national level, coupled with concerns over the mutualization of fiscal liabilities that goes hand in hand with common supervision. We then identify the dynamics surrounding CMU, with its call for supervisory convergence, the growth of supervisory powers and capabilities at ESMA, Brexit and the concomitant exclusion of the UK, but also the reduction of fiscal liabilities due to a credible recovery and resolution mechanism for CCPs as the decisive factors accounting for the present-day potency of a governance concern we trace back to the financial market integration initiatives of the late 1990s. Doing so, our paper contributes to the literature on the power of ideas in the evolution of governance architectures by specifying the context conditions, both ideational and material that condition their potency.
