A Law and Economics Analysis of the European Takeover Directive: What about Enforcement?

Published at: Oxford Business Law Blog

A vast literature studies the role of institutions, such as regulation, for economic outcomes. An implicit assumption in many theoretical and empirical studies in the field is that the law is perfectly enforceable. However, in practice, most of the time this is not the case. The law may not be perfectly enforceable for several reasons. One reason is that enforcers may be capacity-constrained and therefore cannot prosecute each case. Another reason is that the costs of enforcement are too high to motivate economic agents to insist on their rights. There is another ‘European-specific’ reason for imperfect enforcement: European member states, which are obliged to transpose EU-level directives into national laws, often have considerable discretion over the design and scope of their enforcing bodies within their jurisdictions, which they may use to conserve or increase their competitive advantage. Read more

“Never again” (or not?) — The European bail-in regime has yet to solve the systemic problem of implicit government guarantees

Published at: Oxford Business Law Blog

“Never again” was the impassioned conviction of governments worldwide after being forced to bail out banking institutions and provide guarantees and capital to avert systemic collapse as a result of the global financial crisis of 2007/08. Since then, the responsible international regulatory bodies have developed a slew of new regulations, including enhanced supervision, capital surcharges, and resolution regimes specifically for banks that would jeopardize the financial system if they were to fail. But is this bail-in regime credible? Read more