Quora Answer: How Do You Think European Markets Compare to US Markets in Terms of More Robust Disclosure Rules?

The following is my answer to a Quora question: “How do you think European markets compare to US markets in terms of more robust disclosure rules?”

European markets do carry more robust, harmonised disclosure obligations than the United States in several material respects, though the gap is narrower than European regulators like to claim.  MiFID II, in force since 2018, imposes considerably more granular transaction reporting, cost disclosure, and product governance obligations across the European Union than anything comparable in American securities law, and it applies uniformly across all 27 member states rather than through the patchwork of state-level and federal rules American investors navigate.  The Sustainable Finance Disclosure Regulation adds a further layer specifically targeting environmental and governance claims, forcing asset managers to substantiate rather than merely assert.  The United States relies more heavily on Regulation Best Interest and disclosure-based rather than structurally prescriptive rules, trusting that sufficient paperwork, properly read, protects the investor.  Anyone who has actually read a Regulation Best Interest disclosure document knows precisely how much protection that trust actually provides.

Why America Keeps Dismantling Its Own Firewalls

The United States has a well-documented habit of building regulatory firewalls after a crisis, then dismantling them once memory of the crisis fades and the lobbying dollars start flowing again.  The Glass-Steagall Act of 1933 separated commercial banking from investment banking specifically to prevent the kind of speculative excess that had helped trigger the Great Depression.  It held for nearly seventy years.  Congress repealed its central provisions through the Gramm-Leach-Bliley Act, signed into law by President William Jefferson Clinton, on 12^th November 1999, following a lobbying campaign estimated at roughly US$300 million.  The repeal was, in no small part, a legislative ratification of something that had already happened on the ground: Citicorp and Travelers Group had merged into Citigroup the previous year, in a combination that was not technically legal under Glass-Steagall until Congress obligingly rewrote the law around it.

Less than a decade later, the United States suffered its worst financial crisis since the Great Depression it had built Glass-Steagall to prevent.  In fairness, the causal link deserves an honest caveat, because serious economists genuinely disagree on it.  The Cato Institute has argued the repeal was not the proximate cause, noting that Lehman Brothers, a standalone investment bank never subject to Glass-Steagall’s restrictions in the first place, collapsed regardless, and that the crisis was driven primarily by credit losses on subprime real estate lending rather than the specific commingling of commercial and investment banking activity.  That is a fair point on proximate cause.  It is not, however, an argument that the deregulatory instinct itself was harmless.  Gramm-Leach-Bliley’s repeal enabled precisely the kind of universal banking consolidation that made Bank of America’s acquisition of Merrill Lynch, and JPMorgan Chase’s acquisition of Bear Stearns, both executed under emergency conditions in 2008, structurally straightforward rather than legally impossible.  It concentrated risk into fewer, larger, more systemically important institutions, which is exactly the outcome a firewall built after the Great Depression existed to prevent.

The Mistakes That Caused the Global Financial Crisis

The proximate causes of the 2008 crisis were mistakes of underwriting and securitisation, not merely deregulation in the abstract.  Subprime mortgage lenders extended credit to borrowers with limited capacity to repay, on the assumption that rising home prices would always allow refinancing before default.  Wall Street packaged these loans into mortgage-backed securities and collateralised debt obligations, frequently earning AAA ratings from agencies paid by the very banks issuing the securities, a conflict of interest regulators tolerated for years.  Investment banks then leveraged their balance sheets aggressively against these instruments, in some cases exceeding 30:1, meaning a 3% to 4% decline in asset value was sufficient to wipe out the entire equity cushion.

Lehman Brothers filed for bankruptcy on 15^th September 2008, the largest bankruptcy filing in American history at the time, after regulators declined to arrange a rescue.  Its collapse froze interbank lending virtually overnight, because no bank could be certain which counterparty held how much exposure to Lehman-linked instruments, a direct consequence of the opacity Glass-Steagall’s separation had at least partially constrained.  The pattern repeated itself in a smaller, faster form fifteen years later: Silicon Valley Bank collapsed within 48 hours in March 2023, after concentrating its balance sheet in long-duration securities funded by short-duration, largely uninsured deposits that fled the moment depositors sensed weakness, amplified by mobile banking and social media at a speed the 2008 crisis never had to contend with.  American regulatory memory, it turns out, has a shelf life measured in years, not generations.

Why the European Union Moves Too Slowly to Match

Europe’s disadvantage is not weaker disclosure architecture.  It is decision-making speed, and the mechanism is structural rather than incidental.  The European Union’s Capital Markets Union, first proposed in 2014 and 2015 specifically to deepen and unify European financial markets, remains, a full decade later, what one 2025 analysis from the Official Monetary and Financial Institutions Forum bluntly described as “mired in disputes that pit national capitals against one another.”  Taxation rules, insolvency legislation, and the licensing of financial institutions remain national competencies rather than EU-wide ones, meaning any genuine progress requires consensus among 27 member states, each with its own domestic banking sector to protect and its own electorate to answer to.  The successes achieved to date have overwhelmingly been the ones requiring the least intra-union trust, consolidating existing reporting data rather than harmonising genuinely contested rules.

The MiFID II review itself illustrates the pace problem directly.  The European Commission proposed amendments in November 2021.  Member states did not agree on a negotiating mandate until December 2022.  The final, consolidated legislative texts were not published in the Official Journal of the European Union until March 2024, roughly two and a half years to update a piece of existing market transparency legislation, not build a new regulatory regime from scratch.  A crisis moving at the speed of March 2023’s Silicon Valley Bank collapse, resolved by American regulators within a single weekend, would still be sitting in a European Council working group awaiting unanimous member state sign-off.

The Verdict

Europe’s disclosure architecture is genuinely more robust and more uniform, and its 27-nation consensus requirement is precisely why that architecture, once built, tends to stay built rather than getting quietly repealed the moment the lobbyists find a sympathetic Congress.  America’s disclosure regime is thinner, but its single-legislature structure lets it respond to an acute crisis within days, precisely the speed Europe cannot match when 27 finance ministries must agree first.  The trade-off is symmetrical and uncomfortable for both sides.  America builds fast and dismantles just as fast, reliably rediscovering the same lessons roughly once a decade.  Europe builds slowly and durably, and pays for that durability every time a crisis moves faster than a Brussels consensus ever can.

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Terence Nunis | Executive Chairman, Equinox Zenith | Author, The 1% Playbook: The Billionaire Cheat Code