Young, single, but not free: the EU market for financial services

The EU has been increasing its role in financial regulation over the last four decades. At first, the main focus was on promoting trade within the union in a way compatible with the four freedoms: the free movement of goods, services, capital and people. As part of this agenda, the EU prohibited member states from introducing certain forms of regulation that inhibited free trade in services and the free movement of capital. Attempts to promote consistency of regulation tended to involve a process known as ‘mutual recognition’. In other words, member states were broadly free to develop their own regulatory frameworks within which financial institutions operated; companies from one member state could then operate freely in other member states whilst being regulated by their home state. In discussing how regulation at the EU level has become detached from the original founding principles of the EU, this chapter will focus on the regulation of insurance services, though there will also be some discussion of other nonbank financial services