Rule omission, rule migration and the limits of financial industry power

Abstract

This paper seeks to deepen our understanding of financial industry lobbying efforts that result in specific regulatory rules being dropped from the regulatory agenda, or what we call ‘rule omission’. Critically, existing research either ignores rule omission or characterizes it as the pinnacle of lobbying success. We argue that only in carefully mapping out industry preferences and tracking what happens to rules following their omission can we say something about the extent to which finance wins or loses in its effort to shape regulation. Our analysis is based on two in-depth case studies from the European Union: (1) solvency rules in the Institutions for Occupational Retirement Provision Directive (IORPP II), where rule omission does reflect a strong case of industry influence; and (2) short selling rules in the Alternative Investment Fund Managers Directive (AIFMD), a case of rule omission resulting in more stringent rules over industry activities.