Models of the Administration of Banking Regulation

© Springer International Publishing Switzerland 2015
Alexander WellerdtOrganisation of Banking RegulationSpringerBriefs in Law10.1007/978-3-319-17638-3_3

3. Models of the Administration of Banking Regulation

Alexander Wellerdt 

Hamburg, Germany



Alexander Wellerdt

Model types of banking regulatorsDeveloperProcessorPreparerImplementerControllerForm of appearance

Banking regulation is a broad field that reaches from banking supervision, to regulation and implementation standards for bank businesses and to bank resolution. According to the variety of regulatory tasks, there are also numerous regulatory actors at a national, European and international level. In the following, actors of the banking regulation are classified and systemised with the help of characteristics of the administrative organisation. In this way, certain forms of actions and their context, as well as the influence of organisations on decisions can be deduced. They serve as paradigm to understand an economic regulation sector in the broader sense.

3.1 Parameters to Classify Model Types

A clear classification of the administrative organisation in the area of banking regulation is not possible. The classification is always subject to a latent valuation in the light of the political practice of banking regulation. Nevertheless, there are recurring elements of administrative organisations, which can be derived from the written and partially codified legal bases. They define the institutional arrangement, which in turn determines the legal form, organisation principles and tasks and competencies. Organisational relationships are already predestined, but they get their concretisation during the actual administrative practice. At the same time, each classification into model types will reach its limit, as the creation of models follows systematic considerations and no empiric analysis. The influence on decisions is programmed by the institutional arrangements, but the political and administrative practice of multi-level governance always leads to a shift of influence in the architecture of the administration of banking regulation. Moreover, the historical development of banking regulation can be used as basis for the systematic of the current banking regulation architecture, which in turn can be attributed to the figurative sense and purpose of banking regulation.

3.1.1 Historical Development of a Banking Regulation System

Since the 20th century, the history of banking regulation has been mostly updated in response to the banking and financial crises. As a result of an economic and social interconnection of the world, activities of financial institutions have a globally greater influence. To establish a level playing field and to combat regulatory arbitrage, a European and international cooperation developed in the banking regulation.1 In 1974, the current Basel Committee on Banking Supervision was established as standing committee under the name “Basel Committee on Banking Regulations and Supervisory Practices” by the President of the Central Bank at the Bank for International Settlement.2 Herein, the Federal Republic of Germany is represented, beside the Deutsche Bundesbank, by the German Federal Financial Supervisory Authority.3 The aim of the committee was to strengthen the stability of the international financial system. Members were ought to exchange information and experiences to recognise risks of a new international banking crisis at an early stage and to improve the respective systems of supervision.4 Meanwhile, the Basel Committee on Banking Supervision has developed from a non-binding forum for the exchange of experience among banking supervisors with the help of votes of minimum standards to a widely recognised and binding authority that sets frameworks. Since 1999, the Group of Twenty (G20), as global agenda-setter and highest international legitimisation committee, supports the Basel Committee on Banking Supervision. The Group of Twenty is composed of the Heads of State and Government of 31 countries from both industrialised and developing countries5 as well as the European Union. The European Union founded the Financial Stability Board (initially Financial Stability Forum) in response to the economic and financial crisis of 2009.6 The Financial Stability Board is an informal dialogue forum; its membership includes representatives of national central banks and supervisory authorities, international financial institutions and international regulatory and supervisory actors.7 Aim of the forum is to generate an open and constructive discussion about the stability of the world economy and the functioning of global financial markets in order to decide over and implement an effective regulatory and financial market policy between developed and transition countries.8

The European Commission as member of the Financial Stability Board and as observer in the Basel Committee on Banking Supervision9 combines the international and the European level. This has led to an organisational centralisation of actors of the financial market regulation in the European Union.10 The European Union Member States have established a European System of Financial Supervision to secure stable financial markets. At the same time, the European System of Financial Supervision complements the independent European System of Central Banks—consisting of the European Central Bank and the national central banks of all Member States of the European Union—which are primarily committed to price stability according to Art 127 TFEU. The European System of Financial Supervision is an organisational construct not having legal personality.11 It combines macroeconomic and microeconomic regulatory perspectives. For the micro-prudential supervision it can be helpful to have knowledge about macro-prudential potential dangers to identify institution-specific risks at an early stage. Conversely, information on certain risks associated with individual financial institutions is important to identify systemic risks for other financial institutions or the financial system.12 Thus, a European Systemic Risk Board was established to enable a macro-prudential oversight of the stability of the financial system as a whole.13 Risks are ought to be identified, banks shall be warned earlier and emergencies shall be avoided. In addition, three European Supervisory Authorities have been established: for banks14 (European Banking Authority), for market surveillance and security supervision15 (European Securities and Markets Authority) and for the insurance business and company pension schemes16 (European Insurance and Occupational Pensions Authority) to ensure a micro-prudential market supervision and a solvency supervision of financial institutions. In addition, at a macroeconomic level, the European Commission is represented as a voting member at the European Systemic Risk Board and, at a microeconomic level, as a non-voting representative at the European Banking Authority. National regulatory authorities are only involved in the micro-prudential oversight of the European Supervisory Authorities.

In Germany, the supervision is shared between the Deutsche Bundesbank and the Federal Financial Supervisory Authority (Bundesanstalt für Finanzdiesntleistungsaufsicht—BaFin). The Deutsche Bundesbank deals with the ongoing supervision of credit institutions, the Federal Financial Supervisory Authority takes sovereign supervisory and regulatory decisions regarding the credit institutes. The resolution of credit institutions, in turn, is done by the Federal Agency for Financial Market Stabilisation (Bundesanstalt für Finanzmarktstabilisierung). It is an institution directly under federal government control under public law within the portfolio of the Federal Ministry of Finance.

The history of financial and banking crises in the 1930s and 1970s, and especially at the beginning of the 21st century has formed a complex regulatory architecture at international, European and national level. Impulses at international level are usually addressed at the European level and legally solidified. Afterwards they are implemented in the interplay between European institutions and agencies with national authorities through supervisory, regulatory and resolution measures.

3.1.2 Sense and Purpose of Banking Regulation

The historical development of banking regulation goes back to market failure events, resulting in a system of different organisations, which has developed on several levels that are based on the sense and purpose of economic regulation. Regulation is each sovereign exertion of influence on an economic sector which prohibits or commands a conduct within the meaning of regulatory objectives of a particular life or economic sector. The objective of banking regulation is to stabilise the financial system as a whole, by ensuring the functioning of the banking sector and protect investors from losses. In other words, banking regulation is based on the public interest in a functional and effective financial market in order to secure individual prosperity. Consequently, banking regulation—terminology it can be regarded as regulation in the broader sense—follows the overwhelming objective of any economic regulation: regulation avoids or takes up market failure events in multinational markets.

The Basel Committee on Banking Supervision, the Financial Stability Board and the G20 benefit from each other’s regulatory impulses. Together they find an agreement on a global regulatory framework. The involvement of the European Union in the form of the European Commission helps to take up these impulses. Therewith, they do not fizzle out in the huge amounts of non-binding rules of international law of the ‘soft laws’.17 A coordinated legislation takes places at European level which is implemented with the help of European bodies and agencies in combination with the authorities of the Member States in the European Composite Administration. The jurisdiction and responsibility for the supervision of credit institutions remains basically at a national level, but increasing power shifts in favour of the European Central Bank with the Single Supervisory Mechanism, the Single Resolution Board and the European Banking Authority lead to a reversal of the system. It remains to be seen whether sense and purpose of the banking regulation are better achieved centrally at a European level rather than locally by the Member States. What seems pragmatically reasonable after the experience gained during the financial and banking crisis cannot yet be answered legally and economically—it remains to be seen.

3.2 Definition of Model Types of the Administrative Organisation

Modelling helps to classify and systematise various types of administrative organisations at an international, European and national level.18 Parameters of the modelling are elements of administrative organisations which are shared by all types of organisation of banking regulation. Based on institutional arrangements, the legal form, the purpose of the organisation, the organisational principles, as well as responsibilities and competencies can be derived. In addition, organisational relationships are a special element of organisational types in multi-level governance due to the unilateral or bilateral information relations. From these elements, the study develops five types of models of the administrative organisation based on their respective influence on the decision.

The first organisational model of a regulatory actor as developer (Sect. 3.3) promotes the informational exchange between regulatory actors and serves the generation of knowledge. Another organisational model can be viewed as processor (Sect. 3.4), who is incorporated by counselling and mediation in the regulation. Of particular importance is the organisational model of the preparer (Sect. 3.5), who determines decision-making programmes for either the regulation or rule enforcement for the national regulatory authorities at European level. The central organisation model in the field of banking regulation is the implementer (Sect. 3.6), who carries out regulatory decisions at a national level. The last organisational model is the controller (Sect. 3.7), who carries out the monitoring of the implementation of the regulation and the decisions of the regulatory framework at a national level.

3.3 Model Type 1: Developer

The organisational model of the developer is characterised by an informational exchange of experiences and information in order to gain knowledge for regulatory decisions and to provide impulses for a future regulatory framework.

3.3.1 Characteristics

As the first organisational model of a regulatory actor, the developer is characterised by low institutional arrangements. Substantive legal bases range from political declarations or resolutions up to international treaties. They serve as an international platform for networking between public and private regulatory actors. The aim is to gather regulatory experience about the developments in the financial markets from different actors through an informal exchange of information and to build up regulatory knowledge. Such platforms follow no fixed principle of organisation, but bring together several parties without domination and subordination ratios. The central task of this organisational model is to promote the cooperation of several parties with different information and resources and to assume responsibility on a global level. In addition, this organisational model has no binding competencies, but the actors are able to take common positions in guidelines and formulate minimum standards for banking regulation. The organisational model of the developer is both directly and indirectly involved in the organisational relationship. Although not legally binding, guidelines and standards provide direct impulses for the regulation at the European level. Through the involvement of supranational organisations in these committees as member or observer, the results are also indirectly observed in the subsequent legislative process. Such international organisations develop material standards, which set standards for the regulation and implementation at European and national level.19

3.3.2 Form of Appearance

In the area of banking regulation, the Financial Stability Board and the Basel Committee on Banking Supervision as well as Colleges of Supervisors for credit institutes can be assigned to the organisational model of the developer of regulatory standards and guidelines. Financial Stability Board

The Financial Stability Board (FSB) is composed of representatives of national authorities and of one representative of the European Central Bank, the European Commission, the International Financial Institutions20 and the most important Standard-Setting bodies.21 The Federal Republic of Germany has a total of three seats and is represented by the Federal Ministry of Finance, the Deutsche Bundesbank and the Federal Financial Supervisory Authority.

Legal basis of the Financial Stability Board is a declaration of the Heads of Government and State of the G20 on the regulation of systemically important financial markets, institutes and instruments through the establishment of an organisation.22 This declaration was confirmed by the Charter of the Financial Stability Board23 within the international soft law. Sense and purpose of the Financial Stability Forum is according to Art 1 of the Charter of the Financial Stability Board the coordination of national financial authorities and international standard setters in order to develop and promote regulatory policies to ensure a global financial stability.24 Consequently, the Financial Stability Board has developed from a pure coordinating body to an institution that acts as intermediary between nation-states and international standard setters. This decreases and partly eliminates existing deficits of legitimacy of the international standard-setting.25

Organisationally, the Financial Stability Board is split into a Plenary, a Steering Committee and a Standing Committee.26 These are supported by working groups, groups27 and a secretariat.28 , 29 The Plenary is a consensual decision-making body, which adopts reports, principles, standards, recommendations and guidance.30 The Steering Committee prepares the Plenary Meetings, establishes working groups and coordinates their work with the Standing Committees.

As part of its mandate, the main tasks of the Financial Stability Board include the identification of vulnerabilities affecting the global financial system, the monitoring of market developments, to promote coordination and information exchange among authorities responsible for financial stability and to support the establishment of supervisory colleges.31 Furthermore, the Financial Stability Board cooperates with the International Monetary Fund to identify weaknesses in the international financial system and to submit appropriate proposals for reform.32

The members of the Financial Stability Board are obliged to adopt commonly agreed standards and to accept regular analyses of the financial markets by the International Monetary Fund and the World Bank.33 In addition, the Financial Stability Board cannot create any legal rights or obligations for the national governments, their central banks and supervisory authorities or individual financial market participants.34 In other words, the Financial Stability Board has no authority to legislate, implement or enforce. Their decisions are soft law.35

Nevertheless, especially the Key Attributes of Effective Resolution Regime for Financial Institutions36 have an extremely far-reaching practical effect. They set conditions and instruments for a (regular cross-border) resolution regime in order to enable a banking resolution without systemic shocks of the financial system and losses of taxpayers.37 Furthermore, specific instruments are provided.38 They form the legal basis for the regulation of banks at European level and are, if not in whole then in substance, adopted in directives and regulations.39

The inclusion of multipolar actors in the Financial Stability Board creates in fact numerous information relations, albeit without binding rights in the organisational relationship. However, the representation of numerous stakeholders allows a moral bond of the players to decisions and recommendations, which they have themselves worked out. Basel Committee on Banking Supervision

The Basel Committee on Banking Supervision (BCBS) at the Bank for International Settlements is composed of representatives of central banks and supervisory authorities from 27 countries.40 The foundation of the Basel Committee on Banking Supervision was carried out on the basis of international law by a resolution of the Governors of the Group of Ten,41 which can be attributed to the respective nation-states according to the will of the participating central banks.42 However, the Basel Committee has no legal personality.43 Purpose of the Basel Committee on Banking Supervision is to strengthen the banking supervision worldwide and to enhance the financial stability by means of cooperation with a view to regulation, supervision and practices of banks.44

The Basel Committee on Banking Supervision only has a little internal organisational structure.45 The Group of Governors and Heads of Supervision is the oversight body of the Basel Committee on Banking Supervision receiving reports of the Basel Committee on Banking Supervision and endorsement for major decisions. The Committee is the ultimate decision-making body46 of the Basel Committee on Banking Supervision in which the heads of all authorities come together. Decisions are taken by consensus47 among its members.48 In addition, six working groups49 and a secretariat50 support the work of the Committee and prepare the meetings and drafts content.

Main activities of the Basel Committee on Banking Supervision are the exchange of information on developments in the banking sector and financial markets, the identification of current or emerging risks for the global financial system, the establishment and promotion of global standards for the regulation and the supervision of banks, as well as the monitoring of the implementation of Basel Committee on Banking Supervision standards in Member States and beyond with the purpose of ensuring their timely, consistent and effective implementation.51 The major instrument of the Basel Committee on Banking Supervision is the setting of standards, elaborating guidelines and sound practices.52 Particularly important are both, the preparation and publication of harmonised standards for the “International Convergence of Capital Measurement and Capital Standards” which became known under Basel I (1988), II (2004) and III (2010).53 Describing it as international minimum standard idealises that it is a detailed full harmonisation of equity rights, which determines the implementation in the Member States.54 The document “Basel III: A global regulatory framework for more resilient banks and banking systems” complements the Basel II document, which is further developed by new regulatory requirements. Major changes concern the strengthening of the quality and quantity of equity, a global liquidity standard, the securisations of further risks with equity, measures to reduce cycles, debt ratios and a basic concept for the regulation of systemically important banks.55 In particular, requirements for equity capital risk-related losses can be absorbed and the threat of bank insolvency can be reduced.56 In general, the Basel standards serve the overall goals of banking regulation: the protection of investors, the stability of individual bank and the entire financial system. In addition, the Basel Committee on Banking Supervision published core principles for an effective banking supervision. These core principles set minimum standards for the supervision of systemically important banks, the identification of systemic risks, instruments for crisis management and for the recovery and resolution.57 The Core Principles for Banking Supervision complement the Key Attributes of Effective Resolution Regime for Financial Institutions of the Financial Stability Board.

The decisions and recommendations of the Basel Committee are not legally binding, but rely on the commitment of its Member States.58 Nevertheless, they are internationally recognised and implemented by the countries directly involved in the negotiations.59 Thus, the Basel Committee gained high reputation as an international standard setter in the field of banking regulation. The standards are addressed to international banks and enjoy a high recognition, which often form the basis for supervisory practices in non-Member States.60 Standards get additional self-assertion by being consulted by the International Monetary Fund as comparative rule for the assessment of national supervisory systems. The Basel Committee on Banking Supervision reports the results of its work not only to the Central Bank Governors and the Heads of the Supervisory Authorities of its Member States, but in consequence of the financial crisis also to the G20 Heads of State and Government.

Therewith, the information relations are enhanced and a greater involvement in the organisational relationships of banking regulation takes place.61 As a result, the Basel Committee on Banking Supervision plays an influential role in the international banking regulation, even though it has no legal personality and therewith no binding powers.62 Colleges of Supervisors for Credit Institutions

To improve the cross-border supervisory practice, so called colleges of supervisors are established in order to coordinate the supervisory practice for banking groups operating cross-border that contribute to a group related convergence of the supervisory practices.63 Legal basis for these colleges of supervisors are international treaties within the meaning of Art 131 of Directive 2014/59/EC.64 A college of supervisors is a permanent structure for cooperation and coordination among the authorities responsible for and involved in the supervision of the different components of a cross-border group.65 It is chaired by the entity’s home supervisor. They are intergovernmental forums for the exchange of information between the supervisory authorities of the country in which the credit institution has its head office and the supervisory authorities of the countries in which the credit institution has a significant or systemically relevant branch. Aim is to coordinate and facilitate different supervisory practices in cross-border banking groups without decision-making powers.66 Nevertheless, colleges of supervisors create comprehensive organisational relationships between the national supervisory authorities, whose information relations are defined within the framework of the European Banking Authority and the Single Supervisory Mechanism. This player makes an appearance rather as actor for the implementation of material rules for regulation and supervision than as formal organisation.

3.4 Model Type 2: Processor

The organisational model emerges through the counselling and mediation by the programming of regulatory frameworks and regulatory provisions. In particular, interests and impulses of different control levels are regularly processed and connected by national authorities and European institutions.

3.4.1 Characteristics

Another organisational model can be described as a processor. The European primary and secondary legislation mostly provide the legal basis, and establish collegial organisations, which are composed of representatives of the Member States, interest groups and bodies of the European Union. Central tasks lie in the recording of regulatory stimuli and processing them into concrete frameworks at a European level. Nevertheless, even this organisational model lacks essential own decision-making competencies for binding regulations. In fact, the competencies exhaust themselves in binding consultation-, participation-, proposal- and development rights in the enforcement of regulations and rules. They act as a mediator between the European legislative institutions and the Member States. Thus, it is in the nature of the assigned competencies that the processor serves as interface and agent in the organisational relationships between national and international level. This organisational model will play a key role in regulation between national interests and the European legislative process.

3.4.2 Form of Appearance

The European Commission and the European Banking Authority are the form of appearances as processor of international regulatory standards. European Banking Authority

The European Banking Authority is an independent agency of the European Union with legal personality67 as well as a cooperation body68 formed of representatives of the banking supervisory authorities in the Member States of the European Union as well as voluntary observers. The European Banking Authority has a double status as a European agency and as a member driven organisation. Legal basis for the establishment of the European Banking Authority is Regulation (EU) No 1093/2010 in the European System of Financial Supervisors. Aim of the European Banking Authority is to improve the quality and coherence of banking supervision in Europe, strengthen the supervision of cross-border groups and introduce a uniform European single rule book for financial institutions; all in cooperation with the national supervisory authorities.69

The European Banking Authority is organisationally composed as follows: the Board of Supervisors, the Management Board, a Chairperson, an Executive Director and a Board of Appeal.70 The supreme decision-making body is the Board of Supervisors. The Board of Supervisors is composed of the independent heads of all national public authorities, the non-voting Chairperson, and one non-voting representative of the Commission, the European Systemic Risk Board, the European Central Bank and the other European Supervisory Authorities.71 In the Board of Supervisors, Germany is represented by the Federal Financial Supervisory Authority (voting) and the Deutsche Bundesbank (non-voting) as a body of ongoing monitoring. The Board of Supervisors shall give guidance to the work of the Authority and shall adopt opinions and recommendations.72 Decisions of the Board of Supervisors shall be taken by a simple majority of its members whereas voting on legislations of a general nature such as regulatory and implementing standards as well as guidelines and recommendations require a qualified majority.73 The Chairperson prepares the work of the Board of Supervisors for a term of office of 5 years.74 The Board of Supervisors is supported and advised by the Management Board. The six members of the Management Board are elected from among the heads of the national authorities by the voting members of the Board of Supervisors.75 The Management Board ensures that the Authority carries out its mission and performs the tasks assigned to it.76 The Executive Director shall prepare the work of the Board and is responsible for the management of the European Banking Authority for a term of office of 5 years.77 The Body of Appeal is composed of two representatives from each of the three European Supervisory Authorities; it is independent in making its decisions and is not bound by any instructions.78 The decisions of the Body of Appeal may be appealed before the Court of Justice of the European Union.79

The main tasks of the European Banking Authority are the coordination between national supervisory authorities, which ensure the uniform application of the substantive financial market law and the supervision of the competent authorities in the Member States. Specifically, the tasks include the development of technical standards, guidelines and recommendations,80 the monitoring of compliance with the unional rules by national supervisory authorities,81 the settlement of disagreements between competent authorities in cross-border situations,82 the coordination of the created colleges of supervision within the sectoral legislation83 and the monitoring of systematic risks emerging from cross-border financial groups.84

In particular, the supervisory Colleges of the European Banking Authority have important functions. First, a uniform application of the law shall be supported and a functioning of the colleges of supervisions shall be ensured both by the participation in colleges of supervisors.85 Of particular importance is the ability to initiate and coordinate Union-wide stress tests for banks.86 To guarantee the equivalence of supervisory rules and powers as well as sanctions in all Member States of the European Union, not only on the legislative level, but also in the implementation and enforcement, the European Banking Authority can design technical standards. By decision of the European Commission, these acts of law receive direct effect in the Member States. There are two different types of standards that are prepared by the European Banking Authority and adopted in consultation with the European Commission, the European Parliament and the Council. The regulatory technical standards87 developed by the European Banking Authority and submitted to the European Commission according to Art 290 TFEU for approval.88 The Commission may amend the content of the draft only in very limited cases, after consultation with the European Banking Authority. The adoption of a draft by the European Commission is followed by the forwarding of this draft to the European Parliament and the Council, which must raise their objections within a month.89 Besides implementing technical standards90 are developed by the European Banking Authority, which can be altered widely by the European Commission according to Art 291 TFEU, while the involvement of the European Parliament and the Council is limited to mere information rights.91 Standards are published as Decision or Regulation in the Official Journal of the European Union. Guidelines and recommendations are not legally binding. However, the national authorities have to apply Decisions or Regulations or justify their non-application against the European Banking Authority, which in turn publishes the non-application.92 Through these comply-or-explain mechanisms, the application pressure for the Member States shall be increased. In addition, the European Banking Authority can take over the settlement of disagreements between national supervisory authorities under the supervision of banks acting at European level and support or replace national authorities in the decision-making process in a crisis.93 Specifically, the European Banking Authority can address binding decisions to nation supervisory authorities (direction) or to individual market participants (intervention). However, it has no powers to compel the enforcement of these decisions. The enforcement is in the responsibility of national supervisors.

The European Banking Authority is involved in a variety of organisational relationships through information relations to national supervisory authorities, via Colleges of Supervisors, the Commission in the standard setting procedure and to the members of the Board of Supervisors. This ensures the exchange of information and the coordination of supervisory practices through a coherent application of law across the Member States of the European Union. European Commission

The European Commission is in accordance with Art 13 Treaty on European Union (TEU)94 a body of the European Union. It is composed of a representative of one of each 28 Member States. These so-called commissioners are nominated by the governments of the Member States and are confirmed by the European Parliament. They are authorised to commit for the Member States they represent and exercise the voting right. Legal basis of the European Commission is Art 17 TEU. Organisationally, the European Commission is headed by a president, who is assisted by six Vice-Presidents, who in turn control and coordinate 20 commissioners and their Directorates-General. The European Commission acts as a College that decides by oral advice or written by circulation under Art 250 TFEU with a majority of its members. The central task of the European Commission is preparing and introducing legislative initiatives with the help of the sub-structure of the Directorates-General and services. Rather, the European Commission is the representative of the European Union to the outside and carries out the role of the executive in the model of separation of powers in Europe. In the ordinary legislative procedure after Art 289 TFEU the European Commission plays an initiating role, as the legislative procedure is periodically initiated by a proposal of the Commission according to Art 294 (2) TFEU. By the drafting of legislative proposals in the Directorates-General and services, the European Commission can already influence the programming of acts of law. Through the cooperation of the European Commission with the Directorates-General and services a variety of information relations that have a huge impact on the decisions of the Commission in the organisational relationship.

3.5 Model Type 3: Preparer

The organisational model of the preparer has great influence on the settlement of decision programmes. Regulatory decisions are programmed either by specifying a European regulatory framework which requires the implementation of Member States or by a far-reaching and binding regulation in the Member States.