Shareholding in EU: is “indirect holding” approach appropriate in achieving financial integration?
Journal of Financial Regulation and Compliance
ISSN: 1358-1988
Article publication date: 4 February 2014
Abstract
Purpose
The purpose of this paper is to focus on the specific “shareholder's” concept of transparency.
Design/methodology/approach
It considers that indirect securities holding systems limit the degree of “post-trading” transparency. The main concern is that an adverse effect of globalized capital markets is that the actual shareholders are not registered in the official registries and registrations are effected in the name of intermediaries acting on their behalf. It further considers that new EU legislative action should be taken to address the legal issues of securities holdings as a key parameter for EU integration.
Findings
A new architecture of the securities holding system is proposed in this paper to be adopted at the EU level on the basis of the analyzed direct registration, i.e. registration of all the actual shareholders in the registries. It is considered that this architecture will promote securities holdings transparency for all systems, either direct or indirect, and hence enhance investors' protection and financial confidence in the markets. Focusing on the financial crisis of the recent years, it is worthy of note that a key parameter in solving this crisis problem could be considered not only the imposition of more possible regulatory requirements on all financial players but also the improvement credibility of the markets by making their operation more transparent. Direct registration could be defined as a method of making the markets more transparent in this regard.
Originality/value
In the light of the financial crisis of 2007-2009, this is one of the first studies, which clearly argues that direct registration could be considered the appropriate method of making the financial markets more transparent. Therefore, it calls for the EU legal intervention should therefore be accelerated. By delaying improvement in the efficiency of the available infrastructures mainly by utilizing all the advantages that technology offers, the markets accept the additional cost of higher risk coverage.
Keywords
Acknowledgements
JEL classification – K22, G32, G34 An earlier version of the paper was presented at the International Conference on “Improving financial institutions: the proper balance between regulation and governance”, Hanken School of Economics, Helsinki, 19 April 2012 and at the Conference on “Research on economic theory and econometrics”, Milos, 11-15 July 2012 and the authors thank the participants for valuable comments. Kouretas acknowledges financial support from a Marie Curie Transfer of Knowledge Fellowship of the European Community's Sixth Framework Programme under contract number MTKD-CT-014288, as well as from the Research Committee of the University of Crete under research Grant No. 2257. The authors thank without implicating Eva Banincova, George Bitros, Bonnie Buchanan, Harris Dellas, Miriam Garnier, Alberto Franco Pozzolo, Chris Redmond, Kenneth Spong and George Tavlas for valuable comments and discussions. The authors also thank an anonymous referee for many helpful comments that improved the manuscript substantially. The usual caveat applies.
Citation
P. Kouretas, G. and Tarnanidou, C. (2014), "Shareholding in EU: is “indirect holding” approach appropriate in achieving financial integration?", Journal of Financial Regulation and Compliance, Vol. 22 No. 1, pp. 15-25. https://doi.org/10.1108/JFRC-10-2012-0040
Publisher
:Emerald Group Publishing Limited
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