A step too far? The European financial transactions tax on shadow banking. Issue 6 (2nd July 2016)

• Record Type: Journal Article
• Authors: Gabor, Daniela
• Is Part Of: Journal of European public policy. Volume 23:Issue 6(2016)
• Page Start: 925
• Page End: 945
• Publication Date: 2016-07-02
• Subjects: Collateral -- European Central Bank -- financial transactions tax -- repo markets -- liquidity -- shadow banking; European Union countries -- Politics and government -- Periodicals; Political planning -- European Union countries -- Periodicals; Politique publique -- Pays de l'Union européenne -- Périodiques; Pays de l'Union européenne -- Politique et gouvernement -- Périodiques; 361.61094
• DOI: 10.1080/13501763.2015.1070894
• Languages: English
• ISSNs: 1350-1763

Abstract

ABSTRACT: This paper focuses on the European Commission's proposals to include the repo market – a market systemic to European (shadow) banking – in the financial transactions tax (FTT). It asks why the FTT governments negotiating under the enhanced co-operation procedure quickly removed the repo market from the scope of the FTT. It argues that the European repo market, rather than a shadow market energized by regulatory arbitrage, as it is customary to portray it, grew out of a public–private joint venture before the crisis. Thus, regulators became deeply embedded – through their government bond markets and policy frameworks – in (repo) market-based finance. This convergence in public and private interests creates new trade-offs and ambiguous preferences that allow private finance to successfully mobilize resistance to reform, creating coalitions with public actors such as the European Central Bank.