 Thank you very much, Michael, and good afternoon, everybody, and thank you so much for turning out on an utterly miserable day. So it's a great pleasure and thank you to the IEEA and to my chairman for a very warm welcome this afternoon. Now, I have to admit, being invited to speak to the IEEA on issues related to financial regulation and so on really presents a dilemma because how do you capture the salient issues given the immense scale of recent and ongoing regulatory reform? Since 2008, of course, but specifically in the last two or three years or so, where we've seen the establishment of banking union and its institutions, and also the current political and policy priority capital markets union, the action plan for which was presented by the Commission in September 2015. Now, unusually for the EU in this space, the reforms have bitten across the four dimensions of financial governance. Regulation, which is long familiar to the EU, but also supervision enforcement, and finally the resolution and rescue of failing institutions. And these reforms have required significant institution building with its distinct constitutional, legal and political challenges. And they've seen the long-standing single market in financial services project move from being one of market access and liberalisation to being, at least in part, one of risk mutualisation with supporting institutions. And this last development has the potential to significantly disrupt the single market through the construction of distinct financial governance arrangements for the euro area. So the scale of change has been vast, the likely outcomes are still a matter of intense speculation and empirical evidence is only slowly emerging. The balance of competence between the EU and its member states has been radically changed and the strain on the underpinning constitutional and administrative law of the EU remains intense. And all of this in one of the most contested areas of economic governance, where national interests are strong, reflecting different economic funding models across the EU. So, taking the current Capital Markets Union agenda as something of an opportunity for reflection, my remarks call for a pause, for some tinkering under the bonnet and for a break from grand designs. So I'm first going to tour some of the major features of the recent reform period. I'll then briefly consider the nature of Capital Markets Union and I'll then speculate as to the issues generated by CMU, which is the hwash of my remarks. Hwash should EU financial regulation be addressing. Now I'll do my best to avoid the acronym SUP, which is very dense in this area, but just a heads up on two, which I've no doubt everyone in the room is familiar with, but Mifffitou Mifffir is the major markets regulation in the EU and CRD4, CRR of course the major banking measure, and these are the leviathans of the financial crisis project following the last number of years. So, and I'm just going to literally leave that slide there to avoid sort of death by PowerPoint over lunchtime. So just a whistle stop tour of the major features of the last number of years. So first on regulatory governance. So since October 2008 regulatory or rules based governance for the financial system in the EU has changed out of all recognition. The movement from regulation as a tool to support liberalisation, to regulation as a means for imposing politically agreed standards of behaviour on the financial system, that movement was well underway before the crisis, but it has since become turbo charged. First, regulatory governance has changed in reach and style with the adoption of a single rule book of unparalleled breadth and depth. The single rule book includes some 40 or so major legislative measures, many in the form of regulations. It also includes a dense secondary rule book, which even for someone who's been in the sphere for almost 20 years almost defies analysis. To take just one example, the September 2015 proposals by the European Securities and Markets Authority, ESMA, which supports secondary EU rule making, looking at those proposals for a subset of secondary rules on market microstructure runs to over 500 pages of granular technical detail. And infamously, one of the technical rules applicable to banking regulation runs to over 1,000 pages of the official journal. Secondly, on regulatory governance, with this change to the rule book, has come a resetting of the balance of competence between the EU and its member states. The scale of this shift is evident from, for example, much wider regulatory perimeter control around the EU financial system. A raft of new actors are now regulated through the EU rule book, reflecting the G20 agenda to close regulatory gaps, but also removing member state discretion. Emerging issues are now being dealt at EU level. Recent examples include index rigging and the tentative moves towards crowdfunding. Previously, there would have been experiments at national level before EU intervention. Non-financial actors are increasingly being covered by the EU financial rule book, such as corporates using derivatives for hedging. Importantly, the long-established exemptions for local member state markets and their distinct features, these exemptions are either being closed off or their use is being subject to EU approval processes. Third on regulatory governance, major changes to regulatory design have followed. Hitherto, EU financial regulation has typically recycled regulatory techniques which have been incubated at national level in order to support passports for cross-border activity. The new single rule book, however, is experimenting with a myriad of new techniques. Some reflect G20, financial stability board, Basel committee, innovations and commitments, but others are distinct to the EU. If we take examples from Miffa2 Miffyr markets and CRD4 CRR banking, these innovations include the new market microstructure rules under Miffa2, the new product intervention and product governance rules under Miffa2 and the bank governance and pay rules under CRD4. And fourth and finally, there has been a change in ambition. There has long been a tension between EU financial regulation as being facilitative, the EU as market maker, providing conducive conditions for a liberalised market and the EU as regulatory, the EU as market shaper, dictating the nature of the financial market. Now over the crisis there are deeply rooted tectonic plates under the single market in financial services and which mark sharp differences across the member states reflecting different varieties of capitalism. These began to move, revealing the depth of difference with respect to, for example, the appropriate intensity of financial market development, the level of financialisation which is optimal and the relative balance between bank and market finance. After this period of conflict and contestation, we now have a regime of distinct market shaping quality. Miffa2 Miffyr, for example, dictates the levels at which equity, bond and derivative markets are deemed to be liquid or illiquid. It dictates the limits to the positions which may be held by commodity derivative traders. And it specifies the derivatives and other instruments which must be traded on particular venues. These are rules of a highly interventionist marking shapering effect. The banking rules as is clear and as an emerging stream of reports are beginning to indicate are now a major driver of bank business models. One of the many outcomes of this is severe pressure I would suggest on the underpinning constitutional settlement. Does the treaty support market shaping regulation? This is not always clear as the treaty is directed to market making, the construction of the single market. I'd suggest the position is similar with respect to supervisory governance. Supervisory governance has long lagged regulatory governance in the EU resting at member state level. But this has now changed dramatically in part because of the related and seismic institutional reforms. First, of course, banking union. I will not rest long on banking union and its single supervisory mechanism and single resolution mechanism. First, the SSM became operational right about this time last year and the SRM for at least some of its functions went live earlier this year. But clearly this new system for managing bank risk mutualisation and the related centralisation of supervisory and rescue functions for the banking union zone, obviously very broadly the euro area, has recast how we conceptualise EU financial governance. Previously it was a regulatory construct, now it's an institutional one. Banking union has also and I'll return to this imposed a breach with potentially existential implications for the hitherto impregnable EU commitment to a single market in financial services. This commitment has been a policy priority as far back as 1966 with the Secreira report which launched in effect the whole single financial market project. Secondly unsupervisory governance, sitting I would suggest very uncomfortably operationally, politically and constitutionally outside the banking union structures and with oversight of the wider single market more generally is the European system of financial supervision established in 2011. This is composed of the national authorities who anchor the system, supervising rules enforcing them. The three European supervisory authorities, the AESAs, ABA for banking, ESMA, capital and securities markets and IOPA insurance and pensions. These three AESAs carry out a range of tasks supporting the commission on technical rule making and more generally supporting supervisory convergence and coordination. Then with the horizon scanning function over the whole the European systemic risk board reviewing for systemic risks. So how might these changes to supervisory governance be characterised? I would suggest four features. First by incrementalism and momentum. The AESAs for example are highly dynamic and since their establishment in 2011 have been slowly but fairly inexorably acquiring more power formally and informally. Secondly they're characterised by expediency. Potential treaty and administrative law obstacles have been worked around with often ingenious solutions to achieve political outcomes but these solutions may prove to be unstable. Third by difference. The banking union structures are centralised. They're driven by risk mutualisation and in particular mutualisation of the costs of bank rescue. The single market structures are not. They are network based and their concern is not risk mutualisation but the stability and effectiveness of the single market. And their operating model is coordination and cooperation not centralisation. And finally I would suggest that supervisory governance has been characterised by very strong centrifugal effects. The dynamic development of the AESAs for example shows signs of leading to much stronger convergence in supervisory practices across the EU. While banking union may although I don't think in the short term drive further centralisation. So turning to capital markets union. Where is it after all of this since 2008 or so? Well it builds on the crisis era reforms but its concern is market efficiency and the capacity of the EU financial system to support growth. It seeks to diversify sources of funding away from banks to capital markets to strengthen funding sources particularly for SMEs. And thereby to secure greater financial stability. Now the strengthening of market based funding for the EU has been a policy concern since 1966. This is not new. Neither is the capturing of this concern in a distinct policy agenda with political backing. We've seen this before the crisis under the financial services action plan 1998-1999 and over the crisis in measures such as the SME growth market new trading venue set up under MIFA 2. CMU is also a distinct regulatory agenda. It assumes that law can drive or at the very least facilitate particular forms of funding. It has two flagship projects the first simple transparent and standard securitisation. Essentially designed to kickstart the sluggish securitisation market and free up funding capacity for banks. And then also reform of the prospectus directive which governs how companies access the capital markets. But it has a very wide range of other measures from fund reform to covered bonds to market infrastructure. Thus far it does not have a distinct institutional or supervisory element. It's based on standard single market arrangements and in particular on rule harmonisation. So it's very different to Banking Union. Banking Union is an institutional project designed to support risk mutualisation. CMU is really about risk diversification and about harnessing market forces to support a single market in fund raising using long standing single market devices. I would suggest that the CMU agenda is something of a hodgepodge of the mundane and the aspirational, the specific and the general, the short term and the long term. Its focus is narrow if its ambition is transformative. But it may, depending on the relationship between CMU and financial union, whatever that may be, have disruptive effects on the current settlement governing the single market in financial services. So turning to my last set of comments as to the implications of all of this. I think the first issue which arises is one of characterisation. What is being constructed with Capital Markets Union? Is it a CMU, a Capital Markets Union, based on the single market and its arrangements? Or is it more of a grand design, a more centralised financial union with distinct institutions which displace those of the member states? This goes to the heart of the current and growing tensions between the Euro area and the single market. And the difficulties with multi-level governance in the financial area which have been opened by Banking Union. Now CMU is currently being expressed as a single market agenda. This is very clear from the commission's agenda and just a few weeks back in a supportive European Council resolution. Similarly, the policy trail suggests that there is no commission appetite and certainly very little appetite from the ASAs themselves to have their coordination powers radically increased on the lines of the Banking Union reforms. The operational and constitutional complexities are in any event immense and are unlikely to be addressed absent some form of resetting shock of the type that drove Banking Union. The political context is also of critical importance. Any move to re-characterise CMU as a financial union with centralised structures would be highly sensitive given the current Brexit debate and the sensitivities related to Euro area and single market governance. For example, complex governance arrangements are already in place within the European Banking Authority to manage the risks of Banking Union Euro area caucusing. While Prime Minister Cameron has recently included the protection of the single market interests given the risks of Euro area caucusing in his list of treaty reform. And yet there may be considerable centrifugal effects. The June 2015 five presidents report on completing EMU deploy CMU as a device for completing EMU and speaks of a financial union through which risk would be efficiently diversified. The European Central Bank has recently and similarly spoken of and I quote a vanguard group of member states. Close quote within CMU and suggests that the road map towards a genuine CMU should include a single capital market supervisor. And the centrifugal effects may be all the stronger as prudential regulators globally such as the Financial Stability Board, the Bank of England and of course the ECB SSM are now looking closely into the stability risks beyond the banking markets and arising from capital markets. So which is it? Do we embrace a multi-speed governance arrangement for the EU financial system, a grand design as it were? This would include in parallel with the currently complex Banking Union single market arrangements, a centralised financial union with distinct institutions sitting within a wider capital markets union for the single market. Do we accept accordingly the risks of financial union caucusing and more generally of potentially competing institutional structures within a highly complex ecosystem for the EU's financial system? Or can the natural centrifugal tendencies within EU financial governance be slowed and CMU contained? The latter is certainly the safer route particularly as it is not yet clear what the effects of the crisis era rule book are or indeed how governance arrangements for the EU capital market can best be organised. My second comment goes to tinkering under the bonnet. Now it's hard to avoid the sense that there is an inescapable internal dynamism trajectory reform at present. And there is an urgent need however for review and reconsideration, something traditionally EU financial governance has not been good at. I suggest five avenues for review very briefly, empirical review or observation, legal review, constitutional slash institutional review, enforcement and retail markets. So turning first to empirical observation. So the period since 2008 has been the first time the EU and indeed any other global financial system has engaged in such a programme of intense reform with untested tools and with such potential for market change. The massive market shaping method to mafiaire on market regulation is now very likely to have its implementation date pushed back from 2017 to 2018 underpinning the scale of the challenge and the technical difficulties. The empirical evidence on effects is just beginning to emerge and the commission over the summer has launched a number of important studies. The important review clauses which apply to all the crisis era measures are just beginning to activate and will continue to do so over the next five years or so. 2017 to 2020 will see one of the most important data sets ever produced on the interaction between regulation and the financial market. As COD4, CRR effects become clear and on the market side the impact of myffa2's market shaping becomes clear. We are now at the time for empirical observation and assessment rather than new adventures in regulatory design. Second and beyond the empirical difficulties there are particular legal challenges including the proportionality question. Much of the crisis era rulebook contains proportionality mechanisms, directions to regulators or to the market to apply a rule proportionately. But what does proportionality mean? Should it address the need for local market sensitivity but then what about the single rulebook and arbitrage risks? How much calibration do we allow for smaller market participants but they may be a source of risk? Proportionality clauses are often injected in crisis era measures to achieve compromise, they're functionally practical. But at the cutting edge they can cause difficulty. A recent example of this relates to how the controversial COD4 bank bonus rules apply which is proving controversial with the current ABA remuneration rules on pay. This issue is becoming increasingly live and with important implications for the single market. Third, constitutional and governance pressures are becoming ever more intense as the post crisis governance system matures and as unexpected stresses emerge. Here I suggest three short examples related to the ASIS. The ASIS within the single market are now playing a critical role in the design of technical secondary rules adopted by the commission. But there is a structural strain between the commission as the constitutional location of rulemaking power who adopts or endorses rules and the highly expert technocratic ASIS who advise following extensive design processes based on national, international and industry engagement. Now this uneasy split of power which does not reflect administrative governance more generally for financial markets reflects of course longstanding constitutional limits and traditions. But there are particular difficulties emerging. What if for example a highly technical rule needs to be suspended urgently given its unexpected effects? The extraordinarily granular and market shaping new rules now emerging, this instrument is liquid, this instrument must be cleared, this one must be traded. They raise the consequence the specific market stability risks might arise from their application. Particularly as many of these rules were designed without a secure empirical base simply because the data is not yet there. Can the EU administrative system support a speedy suspense of power? Should this power be located with the eases? The constitutional questions are difficult but the consequences are of great practical importance. What about accountability and oversight? In other words, who watches the watchers? The EU is currently groping its way to a new administrative law with these new structures but it is in its very early days. The eases are increasingly for example exerting direct operational influence on how national supervision is carried out. Now I do not suggest that this pressure towards a European approach to financial supervision is not functionally optimal, it may well be. But good administrative governance for the financial system requires political oversight of administrative actors. And this applies all the more as governance shifts to the EU level and in such a contested area of economic governance. EU level accountability however is typically designed to reflect the treaty balance of power and the interests of Member State Council, Commission and the Parliament. But accountability over granular operational decisions impacting the financial market requires closer scrutiny. Should we be designing new oversight boards, new accountability structures as the eases become more powerful? And if so, how do these fit within current treaty constraints? There are multiple ways of thinking about accountability, a lot of work has been done on the international financial governance test case for example but a debate is needed. And finally on constitutional institutional questions, the institutional ecosystem is becoming increasingly complex and potentially unstable as our new administrative actors coordinate, compete and form and reform alliances. New institutional games are being learned, responsive and experimental solutions are developing but observation and review is needed as these institutions learn to play a new game. The fourth candidate for review and briefly is the weakest element of EU financial governance enforcement and sanctioning. One of the sharpest lessons of the financial crisis has been that regulations, supervision and enforcement must form a seamless continuum if the objectives of rules are to be achieved. But enforcement remains a challenge for the EU. It is deeply rooted in local, political and cultural conditions, procedural constraints and institutional context. So what is the appropriate balance here? How to ensure poor enforcement in one member state does not threaten stability. While ensuring sufficiently secure safety valves are left open at national level. What is the role of the EU? And finally a plea for a much closer focus on the household consumer of financial products. As I look at quite a bit of my work at the Cinderella of EU financial regulation, completely overlooked but periodically pulled into the limelight with unexpected effects. Cinderella is currently having her moment at the ball being pulled into the capital markets union debate and being characterised as a somewhat Olympian capital supplier to the single market. Exercising choice across an enhanced range of investment products. But there is a great deal to be done here in understanding the drivers of household investment behaviour, the features of household decision making and the optimal design of rules EU or otherwise before the beleaguered household consumer can be further financialised and drawn into the policy architecture of financial governance. In conclusion therefore I suggest that this is not a moment for grand designs but for careful observation and adjustment. In this regard CMU may prove to be a disruptive force. If it distracts the EU from the questions however humdrum and often intractable which nonetheless need to be answered. Thank you for your attention.