The Lamfalussy process is an approach to the development of financial service industry regulations used by the

European Union The European Union (EU) is a supranational political and economic union of member states that are located primarily in Europe. The union has a total area of and an estimated total population of about 447million. The EU has often been de ...

. Originally developed in March 2001, the process is named after the chair of the EU advisory committee that created it,

Alexandre Lamfalussy Alexandre, Baron Lamfalussy (; 26 April 1929 – 9 May 2015) was a Hungarian-born Belgian economist who served as President of the European Monetary Institute (EMI) from 1994 to 1997, which was the forerunner to the European Central Bank (ECB). ...

. It is composed of four "levels", each focusing on a specific stage of the implementation of

legislation Legislation is the process or result of enrolling, enacting, or promulgating laws by a legislature, parliament, or analogous governing body. Before an item of legislation becomes law it may be known as a bill, and may be broadly referred to ...

. At the first level, the

European Parliament The European Parliament (EP) is one of the legislative bodies of the European Union and one of its seven institutions. Together with the Council of the European Union (known as the Council and informally as the Council of Ministers), it adopts ...

and

Council of the European Union The Council of the European Union, often referred to in the treaties and other official documents simply as the Council, and informally known as the Council of Ministers, is the third of the seven Institutions of the European Union (EU) as ...

adopt a piece of legislation, establishing the core values of a law and building guidelines on its implementation. The law then progresses to the second level, where sector-specific committees and regulators advise on technical details, then bring it to a vote in front of member-state representatives. At the third level, national regulators work on coordinating new regulations with other nations. The fourth level involves compliance and enforcement of the new rules and laws. The Lamfalussy process has provided a significant impetus in delivering successful agreements on four key measures of the

Financial Services Action Plan The Financial Services Action Plan (FSAP) is a key component of the European Union's attempt to create a single market for financial services. Created in 1999 and to last for a period of six years, it contained 42 articles related to the harmonis ...

: the Market Abuse Directive, adopted on 3 December 2002; the Prospectus Directive, adopted on 15 July 2003; the Markets in Financial Instruments Directive (

MiFID Markets in Financial Instruments Directive 20142014/65/EU commonly known as MiFID 2 (Markets in financial instruments directive 2), is a legal act of the European Union. Together with Regulation (EU) No 600/2014 it provides a legal framework fo ...

), adopted on 27 April 2004 and the Transparency Directive, adopted in 2004. The Lamfalussy Process is intended to provide several benefits over traditional lawmaking, including more-consistent interpretation, convergence in national supervisory practices, and a general boost in the quality of legislation on financial services. Nevertheless, the Lamfalussy Process has provoked controversy as it allows some element of bypassing accountable oversight by the

and the elected

, thereby embodying a further move away from

representative democracy Representative democracy, also known as indirect democracy, is a type of democracy where elected people represent a group of people, in contrast to direct democracy. Nearly all modern Western-style democracies function as some type of represe ...

towards

technocracy Technocracy is a form of government in which the decision-maker or makers are selected based on their expertise in a given area of responsibility, particularly with regard to scientific or technical knowledge. This system explicitly contrasts wi ...

. The creation of the

European System of Financial Supervision The European System of Financial Supervision (ESFS) is the framework for financial supervision in the European Union that has been in operation since 2011. The system consists of the ''European Supervisory Authorities'' (ESAs), the European Syst ...

(ESMA, EIOPA and EBA), which took over from the Advisory Committees on 1 January 2011, has resulted in some changes regarding how the four level legislative procedure operates, with the EU Authorities being given a greater role and more powers.

References

External links

Lamfalussy Report

Regulatory process in financial services

Diagram: The four-level regulatory approach under the Lamfalussy process

Financial Services Authority (UK regulator)

Market Abuse Directive

Prospectus Directive

Transparency Directive
Financial regulation European Union law Regulation in the European Union {{EU-stub