The Lamfalussy process has generated two opposing distortions. Excessive delegation to rulemaking at Levels 2 and 3 has sparked regulatory inflation, while over-specification in Level 1 legislation has led to institutional inertia. These contradictory tendencies reflect a deeper structural issue: the absence of fully centralised supervision.
In this Policy Brief, we propose a two-phase reform strategy. In the short term, it involves streamlining existing rules and enhancing supervisory convergence. Longer term, it calls for reforming governance to empower European Supervisory Authorities within principles-based legislation, while introducing safeguards to respect the Meroni doctrine. Only by sequencing simplification and delegation can the EU shift away from legislative micromanagement towards adaptive financial governance that balances harmonisation with flexibility.
