Measuring the volume of EU financial regulation

One way of thinking about the complexity of the EU framework for banking, finance, and capital markets is to look at the sheer volume of financial regulation in the EU. It is surprisingly difficult to find a definite answer on how big the entire EU rulebook is. We counted every document and every page in the rulebook - and the results are staggering: our best estimate is that there are 1,629 documents and roughly 95,500 pages.

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Much needed reforms since the global financial crisis have made the EU financial system stronger and more resilient. But there is a growing sense that this process has gone too far in terms of volume, detail, and complexity. The increased volume of regulation in the EU has reached a point at which the overall burden of regulation imposes significant direct costs and, perhaps more importantly, indirect costs on market activity and the wider economy. One way of thinking about the complexity of the EU framework is to look at the sheer volume of financial regulation in the EU. It is surprisingly difficult to map the entire rulebook for financial services in the EU. When you ask around in Brussels or in the capitals there’s no definite answer on how big it is (which in itself is quite telling), and we could not find anyone who has gone through the whole rulebook for the financial markets in the EU before. We counted every document and every page so that you don’t have to - and the results are staggering. Here are five key takeaways from our analysis of the volume of EU financial regulation:

1) Where we are today: EU financial regulation follows the so-called ‘Lamfalussy process’ and is made up of level 1 directives and regulations (the ‘hard law’ if you will); level 2 regulatory and technical standards, and level 3 guidelines, opinions, Q&A documents, and best practice. Our best estimate is that there are 78 level 1 texts, 742 level 2 measures, and 799 level 3 measures (plus an additional 10 ECB supervisory guides). That is a total of 1,629 documents - or roughly 95,500 pages. If you lined those pages up side by side, they would almost reach from Forum Copenhagen, the venue where the Informal ECOFIN meeting took place in the centre of Denmark’s capital, across the Øresund tunnel and bridge all the way to Sweden. Or you can think of it as 38 million words - that is about 50 copies of the Bible.

This analysis excludes the dozens of consultations, reports, and reviews from the European Commission and European Supervisory Authorities (ESAs) across levels 1, 2, and 3. It also excludes the regulatory texts and reports published by national supervisors in individual member states when they implement each piece of financial regulation.

Note: we have counted level 2 and 3 documents that relate to more than one level 1 text only once; we do not include ESMA Q&As in our count of documents but we are including them in our count of pages; and we have added the ECB’s supervisory guides to our count of level 3 documents and pages: these guides are not formally part of the rulebook but in reality market participants treat them as such (you may call them ‘level 3.1’)…

2) How we got here: The European Council first coined the term ‘single rulebook’ in 2009 in response to the global financial crisis but the adoption of new rules did not really ramp up until 2012, the year after the European system of financial supervision and the ESAs were established.

There was another noticeable (but perhaps unsurprising) step change in 2014 when the EU’s capital markets union (CMU) initiative was first announced. 2014 saw the highest number of adopted level 1 texts overall(14 in total). The rulebook continued to grow after the first CMU action plan in 2015 and the second CMU action plan in 2020. Fig.3 on page 7 reflects what many stakeholders in this debate have been saying - that there has been a relentless stream of new rules and regulations over the past 15 years in the EU. The bad news is that we are not done yet: the level 1 acts adopted between 2019 and 2024 have empowered the European Commission to adopt up to 430 further level 2 measures. The good news for market participants (and supervisors) is that around one-third of these level 2 measures are being reviewed, with a proposal to put some on hold and delay others. (The bad news again is that this has not been agreed yet, and the procedure for this review is not entirely clear, which is further causing complexity and uncertainty.) Still, we estimate that 2025 could become the year with the lowest number of new documents since 2013.

3) The main drivers of volume and complexity: complexity is added into the EU framework for banking, finance, and the capital markets at every stage of the process. Our research is not intended to be a blame game, a critique of the EU, its institutions, its member states, or the European financial services industry; and we are not aiming to identify individual ‘culprits’. But with every stakeholder behaving rationally within the context of the existing framework, scale and complexity become a feature and not a bug of the EU’s unique structure and rulemaking process - and reflect the complex reality of a complex financial sector. The main drivers of complexity that we identified are political trade-offs and a lack of clarity at level 1, proliferation at level 2, expansion at level 3, (institutional) mission creep, silo-based thinking, and national fragmentation.

4) Why it matters: our analysis of market outcomes in the EU over the past decade across more than 30 metrics of activity in different sectors of banking, finance, and capital markets unfortunately paints a bleak picture. EU capital markets are smaller relative to GDP than the US and a group of comparable developed economies in roughly 80-90% of metrics; the value of activity relative to GDP has shrunk in around half of all sectors; and growth has been slower than the US from a lower base in three-quarters of metrics.

The low level of development and poor relative performance in most of the sectors of EU banking, finance, and capital markets over the past decade is not something that can be specifically blamed on the size and complexity of the regulatory framework. But the regulatory framework should be evaluated in the context of market outcomes, investment, growth, and competitiveness. Volume and complexity have a real-life impact: in terms of the direct costs that they create for supervisors and market participants, and in terms of the indirect opportunity costs around limiting activity, raising barriers to entry, and restricting innovation.

5) And yet…: scale on its own does not equal complexity. And the complexity of the regulatory framework and process for banking and finance would be a less significant problem if markets were more developed (the structure of financial regulation in the US is very complex and there are growing calls to simplify the US framework). Even within the EU there is a wide range in the depth of capital markets, with markets like Luxembourg, Sweden, the Netherlands, and Denmark leading the way, which suggests that you can have efficient, deep, and liquid capital markets within the existing framework in the EU. But more than 1,600 documents and more than 95,500 pages of regulation offer ample opportunity for a lack of clarity and objective; too much prescriptive detail; inconsistencies, overlap, duplication, or redundancy in aims, definitions, reporting requirements, and implementation; translation errors; and clashes in timeline and sequencing…