It Takes Two to Tango: The European Union and the International Governance of Securitization in Finance

Abstract

The role of the European Union (EU) in the post-crisis international governance of securitization does not sit well with the literature that considers the EU as a ‘paladin’ of stringent regulation as well as a ‘rule-taker’ in finance. Whereas in the aftermath of the 2008 financial crisis, the United States (US) promoted more stringent rules on securitization, subsequently, the EU, but not the US, successfully sponsored less stringent rules. What accounts for this ‘deviant case’, that is to say, the EU as a pacesetter in trading down the regulation of securitization worldwide? After examining alternative explanations, this paper draws attention to a novel complementary explanation that can ‘travel’ to other cases, namely, the pivotal role of the United Kingdom (UK) and, specifically, whether the UK sides with the US or the EU in international standard-setting. It takes two to tango in regulating global finance, even more so after Brexit.