From Failure to Failure? The Political Economy of Asset-Management Regulation and Supervision in the EU (2008–2026)

The paper investigates why the European Union has repeatedly failed to extend macroprudential regulation to investment funds and to integrate supervision of the asset-management sector, despite the sector’s rapid expansion and rising political salience between 2008 and 2026. The global financial crisis of 2008 marked a structural turning point for European finance: stricter banking prudential rules and supervision shifted significant volumes of financial intermediation into the asset-management sector. At the same time, the crisis exposed two major policy challenges for the EU. First, a persistent investment gap and structural growth weaknesses. Second, widening transatlantic disparities combined with the growing dominance of US asset managers within the Single Market. Between 2008 and 2026, these pressures turned asset management into a locus of EU debates on systemic risk, market integration and competitiveness, giving it a geoeconomic dimension. Reform initiatives centred on two core policy changes: extending prudential tools from banking to investment funds and integrating the supervision of cross-border asset managers through ESMA. Both represented core policy changes in the asset-management subsystem, but the EU repeatedly failed to adopt them. Building on the Advocacy Coalition Framework, the paper argues that these failures stem from four main drivers. First, the asset-management field operated as a nascent subsystem, with unsettled preferences, unstable coalitions and contested institutional balances, which prevented the consolidation of a dominant reform coalition. Second, within this fragile subsystem, inter-institutional rivalry and intra-industry competition constrained change: central banks argued that systemic risk had migrated outside traditional banking and required macroprudential intervention, while securities regulators and asset managers rejected this framing and defended their business interests, regulatory turf and focus on product oversight rather than systemic risk. Third, Member State preferences, shaped by domestic financial structures, produced strong status quo coalitions: Luxembourg, Ireland and their allies defended their domicile-based model, large Member States remained divided, and repeated deadlock followed. Finally, the absence of an acute financial crisis and the fading memory of the GFC limited political urgency, while emerging concerns about liquidity, competitiveness and growth narrowed the pro-regulatory window. In terms of duration, the paper contributes to the literature on cycles of financial regulation, where tighter rules follow crises but quickly erode as other priorities take precedence. In terms of breadth, the paper traces how post-crisis prudential regulation spilled over, through central banks, from banking into asset management, affected the wider EU economy, and linked financial-stability debates to capital-markets integration and geoeconomic concerns. The paper draws on thirty interviews with policymakers, complemented by EU consultations, press material, grey literature and policy papers. These sources are abductively coded, drawing on existing scholarship on EU financial regulation, and triangulated to provide a practitioner’s reconstruction of nearly two decades of EU financial-governance evolution. The paper contributes to research on EU governance and the political economy of finance. It speaks directly to the workshop’s questions on the depth and duration of crisis effects and on the drivers of stalled or incomplete change, by showing how long-term structural transformations generate reform calls without producing durable change.