Hedging its Bets: The UK and the Politics of European Financial Services Regulation

The paper considers whether we are witnessing a shift in European financial services regulation away from a ‘market-making’ to a ‘market-shaping’ paradigm after the global financial crisis. Through an in-depth examination of UK positions on new EU legislation regulating hedge funds and private equity firms, we suggest that the UK government strayed from its ‘market-making’ principles in supporting further regulatory harmonization and institutionalisation at the EU level. But this does not constitute a fundamental ideational shift. Instead we argue that UK leaders bet that they could shape this legislation to the benefit of the City of London and without sacrificing national regulators’ autonomy, signifying more continuity than change.