1,721,419 research outputs found
The Risky Business of Regulating Risk Management
No full textPolicymakers around the world, including in Europe, increasingly display a tendency to embed risk management into law, for example by mandating risk governance best practices or by requiring firms to have risk management functions in place. Most recently, the European Commission issued a proposal to increase disclosure by listed and large firms on their management of risks, which will indirectly imply greater attention to risk management procedures on their part. This paper, after documenting the phenomenon of Risk Management ‘Juridification’ (RMJ) with specific reference to developments in EU legislation, highlights the numerous shortcomings of such a policy: we first highlight the intrinsic limits of risk management and, even more, risk measurement techniques. Failure to understand such limits may lead to market participants’ over-reliance ex ante and to enforcers’ over-reaction ex post. Next we show how risk management can hardly be distinguished from management and argue that RMJ may well lead to courts’ excessive ex post-review of managerial decisions. We then focus on the intensified perils of standardization, proceduralization, and acritical box-ticking that RMJ implies. After clarifying that RMJ can do little to alleviate systemic risk, we further show that risk management requirements may serve managers’ interests vis-à-vis shareholders and are hard to justify for companies with controlling shareholders. Finally, we highlight their anticompetitive effects due to their higher relative burden on small companies. We conclude that absent special, industry-specific circumstances, RMJ is, if not an even dangerous exercise, a less effective and efficient regulatory tool than policymakers tend to think
Quack Corporate Governance, Round III? Bank Board Regulation Under the New European Capital Requirement Directive
No full textAfter a crisis, broad and sweeping reforms are enacted to restore trust. Following the 2007-2008 Great Financial Crisis, the European Union has engaged in an ambitious overhaul of banking regulation. One of its centerpieces, the 2013 Fourth Capital Requirements Directive (CRD IV), tackles, amongst other things, the perceived pre-crisis failings in the governance of banks. We focus on the provisions that are aimed at reshaping bank boards' composition, functioning, and their members' liabilities, and argue that they are unlikely to improve bank boards' effectiveness or prevent excessive risk-taking. We criticize some of them for mandating solutions, like board diversity and the separation of chairman and CEO, that may be good for some banks but are bad for others, in the absence of any convincing argument that their overall effect is positive. We also criticize enhanced board liability by showing that it may increase the risk of herd behavior and lead to more serious harm in the event of managerial mistakes. We also highlight that the push towards unfriendly boards will negatively affect board dynamics and make boards as dysfunctional as when the CEO dominates them. We further argue that limits on directorships and diversity requirements will worsen the shortage of bank directors, while requirements for induction and training and board evaluation exercises will more likely lead to tick-the-box exercises than under the current situation in which they are just best practices. We conclude that European policymakers and supervisors should avoid using a heavy hand, respectively, when issuing rules implementing CRD IV provisions with regard to bank boards and when enforcing them
Corporate Technologies and the Tech Nirvana Fallacy
No full textThis Article introduces the term Corporate Technologies (“CorpTech”) to refer to the use of distributed ledgers, smart contracts, Big Data analytics, artificial intelligence and machine learning in the corporate context and analyzes the impact of CorpTech on the future of corporate boards. We focus on the tech manifestation of agency problems within corporations and identify—after considering possible market, governance, and regulatory solutions—elements of a governance framework for the CorpTech age. In particular, we take on a prediction often found in the literature, namely that CorpTech has the potential to solve a number of corporate governance problems for good and even make boards of directors redundant. We argue that this claim is based on what we call the “tech nirvana fallacy,” or the tendency of comparing supposedly perfect machines with failure-prone humans. The inherent features of technology and corporate governance reveal that even well-programmed CorpTech leaves the core issue of corporate governance—conflicts of interest among the relevant corporate stakeholders—untouched. In the Corptech age, the key question becomes: “is the human being that selects or controls the firm’s tech conflicted?” If so, CorpTech itself will be tainted. In fact, the problems arising from the transition to a CorpTech-dominated governance environment may, in the short-term, make things even worse: insufficient understanding of the promise and perils of CorpTech and over-confidence therein may even aggravate agency problems within firms
DLT-Based Enhancement of Cross-Border Payment Efficiency – a Legal and Regulatory Perspective
Full text linkFinancial law and regulation have, to date, assumed that regulated activities and functions are concentrated in a single legal entity responsible and accountable for operations and compliance. This regulatory paradigm is under pressure in the world of DLT-based payment arrangements where some ledgers are distributed. DLT arrangements could provide an alternative to the traditional reliance on a mutually trusted central entity to transfer funds and enable the creation of new foundational infrastructures by distributing technical functions or linking existing systems. As such, we identify and outline concepts for use cases where DLT is potentially improving the efficiency of cross-border payments, namely a Best Execution DLT, a DLT application for a Network of Central Banks, a DLT as an AML/KYC utility, as well as DLT arrangements for an Identity Platform, a Small Payments Platform and, finally, an Interoperability Platform connecting multiple closed-loop and proprietary banking systems.
Despite the wide-ranging interest in DLT-based payment systems, research so far has focused on technical concepts and lacked legal details. This paper seeks to fill this gap by providing an initial analysis of the legal challenges related to DLT-based payment systems.
From a legal perspective, the distribution of functions in DLTs comes with new risks, and the need for additional agreements, ongoing coordination across, and governance arrangements among the nodes. Further, in a cross-border context, multiple regulators and courts of various countries (asking for compliance with their own set of rules and regular reporting) will be involved. All of these must decide whether for compliance with the law and regulations they look at the DLT as a whole (herein called ‘the ledger perspective’) or each individual node (that is each institution participating in the DLT, herein called ‘the node perspective’). Moreover, financial and private law must provide for risk allocation, liability, responsibility and accountability for all legal obligations related to each function and activity
The Markets in Crypto-Assets Regulation (MICA) and the EU Digital Finance Strategy
No full textThe European Commission published its new Digital Finance Strategy on 24 September 2020. One of the centrepieces of the Strategy is the draft Regulation on Markets in Crypto-Assets (MiCA), designed to provide a comprehensive regulatory framework for digital assets in the EU.
With MiCA the EU Commission has proposed bespoke regulation for utility tokens and stablecoins including payments tokens, asset-backed tokens and “significant” stablecoins (including “global stablecoins”). As to investment and securities tokens, the EU Digital Finance Strategy relies on the existing body of EU financial and securities law, with the Prospectus Regulation, the MiFID framework as well as the UCITSD and AIFMD at its core, with the intention to incorporate necessary changes as part of the existing ongoing amendment and review processes. MiCA provides for a bespoke prospectus regime for crypto-assets, with the issuing of e-money tokens (i.e. payment tokens), asset-referenced tokens (also known as stablecoins) and crypto-asset services being regulated activities subject to licensing. While supervision of crypto-asset service providers (CASPs) will rest with national authorities, supervision of significant asset-referenced and e-money tokens will rest mainly with the European Banking Authority.
The EU Digital Finance Strategy marks a very important step for the EU in developing both innovation and the Single Market. At the same time, while MiCA is an ambitious legislative project, there is room for improvement. First, the scope of MiCA remains uncertain as the draft MiCA does not clearly delineate between utility tokens subject to MiCA and investment tokens subject to EU securities law. Second, a systematic approach to EU law is absent. Thresholds and concepts known from other EU laws should be firmly embedded in MiCA. Third, a framework for supervisory cooperation with regard to truly global stablecoins is missing
Das "patrimonio destinato" zur Verfolgung besonderer Geschäftsvorhaben - eine rechtsökonomische Bewertung der neuen Möglichkeit einer Haftungssegmentierung im italienischen Aktienrecht
No full textDas "patrimonio destinato" zur Verfolgung besonderer Geschäftsvorhaben - eine rechtsökonomische Bewertung der neuen Möglichkeit einer Haftungssegmentierung im italienischen Aktienrecht
No full textDas "patrimonio destinato" zur Verfolgung besonderer Geschäftsvorhaben - eine rechtsökonomische Bewertung der neuen Möglichkeit einer Haftungssegmentierung im italienischen Aktienrecht
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