Those are complete notes of the entire course of 2024. It is super complete (I got an 18/20 just by using those) with everything said by the professor and what was on the PowerPoint (+the point underlined by the prof regarding the weekly news brief).
note: there might be some typos, sorry in adv...
, Introduction
Eu banking and capital law| Anna Sonnenschein
We will look into how European integration has been realized
→ = specifics and mechanism of EU law
o How the treaties and secondary law have tried o integrate the market
→ >< substance of banking
Case law preparation
→ 2 to 3 cases to prepare
→ Read the cases and using a template, in 1-1/5 page, we summarize the fact, the main argument and the
outcome of the case
→ This must be helpful for us (so that we can use it afterward for the exam)
→ On UFORA
→ Part of the final mark
Exam: oral
→ With written preparation
→ Questions
o Very small practical case hypothetical: simple setting of facts that we will have to analyze
o Theoretical questions (more opinions questions, statement that we will have to explain,
comparison, …)
→ Material: only primary material (legislation)
o NOT CASE LAW NOTES (we thus need to have a general knowledge about what they thought us)
1. Preliminary remarks:
The main element that we are dealing with is integration
→ BUT what does “market integration” actually mean ?
a) Market
= place where goods and services are offered and where supply and demand meet
= Physical or virtual place where supplier and demanders meet and try to enter into transactions
We usually believed that this market is competitive: because you have two suppliers that can supply to someone
else and both have a selfish interest to gain compensation for what you sell
→ We assimilate the market with competition because we have a multiple suppliers and demanders
→ We compete with each other to maximize the possibility to sell
→ Competing could be done in various way: price OR quality
b) Banking/financial market
= Market with financial service to satisfy financial needs to certain person
→ The object of the transaction is financial business
c) Why integrate (financial) markets ?
Ex: country A and B
→ We have several banks in country A and B
→ We have customers in both countries
→ We have a thick wall between the two country : you cannot move from A to B
o We thus have 2 markets and everyone seems happy
Advantages of integration
Why would we integrate these two markets?
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, Eu banking and capital law| Anna Sonnenschein
◊ The theory of comparative advantages
A has oil and B hardly has oil SO it could be interesting as a customer in B to buy directly to A because it will be
cheaper
→ and there is the same for services: some countries have a better know-how
→ countries can have a benefit in opening the market to each other because some countries are better
than other countries and by opening up the boarder you can have an economic benefit
imagine that bank A is better at mortgages and bank B is better at company law
→ in A you only have a bank that deals with company law without being very good at it BUT there is no
alternative to it
→ AND we have the opposite in B
→ By opening the market, it allows the bank to enter the market and enter in competition with the local
bank from A and to win the competition which makes it possible for customer B to enjoy better
mortgages (and the same the other way around for company law)
◊ Economy of scale
You have access to more customers by opening up the boarder
→ BUT how is this beneficial? Scaling up a company is good because you get a cost advantage = economy
of scale
→ The fact that you open a market and that you thus have access to more customer means that if you are
better at the economic game, that you will be able to scale up
o In terms of cost, the cost per unit will stay the same (they are fixed)
We will then have some variable cost (ex: the number of unit my employee can make)
Lots of cost are dependent on, the number of product that I make
o economy of scale looks at all those cost that I can compress
because I am better than someone else, I gain more customers AND because of that I
can compress my price
having a larger market can thus help attaining a gain by decreasing the cost of product BUT also to diverse the
product and services AND in the end it can lead country to specialize in the stuff they are good at knowing that
for the good they are not good, they can simply go to another country (export)
→ the risk that one gains a monopoly is one single market could be broken up by opening the boarder
o and it is a risk to have simply a greater monopoly BUT this is why one of the the primary rule is
about competition
Disadvantages of integration
BUT aren’t there any drawbacks?
◊ No competition
It may well be that you enter into a situation where B does not have any competitive business that is better than
the other
→ So you have a risk of wiping out the industries of certain countries
→ Especially for developing countries
→ This could also a problem of natural resources
How do we deal with that? With some degree of protectionism
→ Limitation access from abroad and providing the producer of a country a privileged access to some
market
◊ Winners and losers
If you have winners, you also have losers which means layout of work force, insolvency, …
→ Is that socially just? Probably not… the people do not care that it is better economically
→ This leads to an adjustment cost of competition (adjust to the new economic environment)
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, Eu banking and capital law| Anna Sonnenschein
◊ Race to the bottom: the unlimited competition
→ The more you compress the cost, the more you will try to do it where you can
→ AND this is why we need rules, a bottom line below which we cannot go
◊ How does the world look at free trade? Very negatively…
“WTO is bad”, it accentuates inequality
Even in Europe, we are no longer promoting free trade as much
→ We talk more and more about strategic autonomy = opening the market in principles while trying to be
more independent in the chain of supply
→ If you make yourself dependent on the supply of commodities, they could just close the tap and then
big troubles (ex: gaz crises)
→ The opposite is that you do not want strategic element of your economy being under the control of or
taken over by foreigners
The European context
All those risks have, of course, to be taking into account in Europe as well
→ It creates more prosperity BUT they can be some disadvantages as well
BUT we have to look at this also in a post war context: the idea was: more market integration allows economy
to prospect and create economic wealth = people happier = people not choosing for political party to create
instability
→ Need to look at the bigger picture: this was first and foremost a political choice and they used this
integration as a tool to create stability
Now we can better understand why the EU though that the creation of a common market was so important
d) The barriers to market integration
BUT how do we create this common market? What are the obstacles that make it difficult? What are the barriers
to market integration ?
“Factual” barriers
Different currency : you cannot freely exchange or acquire AND there is a currency risk
→ A country is sovereign on the currency and can decide that limitations are imposed on the possibility to
limit the conversion to another currency
→ Free convertibility is thus important BUT it is not always the case
Charges, taxes, customs
Language: I cannot sell my product if the customers do not understand me
→ Solution : education (ex: erasmus)
Culture: you cannot sell bear in a country where people do not drink beer (you can then try to incentivize them
and thus create a market)
Level of economic development: if people do not have enough income to buy your goods, you cannot sell
→ Solution: structural fund, subsidies (there are a lot of economic transfer between “rich” and “poor” MS)
Distance which comes at a certain cost
→ Ex: I want to sell a cow on the local market of B BUT I have to climb a mountain to do that and by the
time the cow arrive it will be half dead
o BUT it is a really a good economic benefit to sell it in B
→ Solution: you build a tunnel (there are a lot of structural funds in Europe to overcome the “natural
barriers”)
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