From Failure to Failure? The Political Economy of Asset Management Regulation and Supervision in the EU (2020-2025)

The 2008 financial crisis and its regulatory aftermath have catalyzed significant transitions in the political economy of finance. Notably, the rise of asset manager capitalism has allowed asset management companies to expand at the expense of traditional banks, while the U.S. economy has consistently outpaced its European counterpart. These trends are mutually reinforcing, with U.S. asset managers increasingly dominating the landscape and directing billions of EU savings and investments to the U.S., contributing to the attractiveness of the U.S. economy and fostering low growth and investment in Europe. In response, European policymakers have faced challenges in adapting to these shifts. Central banks have grappled with systemic risks posed by the growth of asset managers, with prudential regulation being traditionally focused on banks. Simultaneously, European institutions and some Member States have championed the creation of an effective Capital Markets Union since 2015, aiming to integrate financial markets, regulation, and supervision to foster the emergence of “European financial champions.” Despite these efforts, progress has been limited. Recent crises, including the COVID-19 pandemic and the war in Ukraine, have intensified the need for private capital to finance Europe’s green and digital transitions. This paper examines the recurring failures to adopt effective asset management regulation and supervision from 2020 to 2025. Utilizing process tracing and drawing from interviews with financial actors, civil servants, policymakers, and academics, as well as analysis of official documents, reports and press, the paper argues that a triple contradiction among Member States, regulatory agencies, and private actors has hindered these regulatory efforts. Beyond addressing the immediate issues of asset management policymaking, this paper contributes to discussions on negative integration, the geography of finance, European policymaking, financial regulatory cycles, and the political economy of prudential regulation. It also adds empirical insights to ongoing debates about Europe’s economic future—spurred by the reports of Noyer, Letta, and Draghi—and the dynamics of transatlantic economic competition.