US and European banks, insurance companies, asset managers and other financial services firms have long competed in multiple jurisdictions with distinct and sometimes incompatible regulatory systems. As transatlantic market integration proceeded throughout the 1990s, problems sparked by these regulatory differences were the focus of a host of often intense conflicts. This chapter explains an unexpected shift in the way American and European authorities managed these conflicts: from cooperation skewed heavily towards the preferences of US officials, and accepted grudgingly by European counterparts, to a Euro-American regulatory condominium characterised by close interaction among decision-makers and mutual accommodation. Why did US officials become more accommodating and European authorities more influential, and why did more balanced cooperation begin in 2002–3 in some sub-sectors but only more recently in others?

This chapter thus examines change in a core G7 relationship during the 2002–7 ‘period of calm’. My findings highlight the role of political authority, institutions and power in reconfiguring transatlantic regulatory cooperation. Lobbying by financial services companies, in part driven by market forces, also played an important role, ensuring that conflicts were resolved through deeper cooperation. But the preferences and actions of private actors were ultimately contingent on political developments tied to the fifty-year-old European integration project. In emphasising official sector decision-making and political power over private influence in public policy, this chapter parallels the contributions by Helleiner and Pagliari, Walter, and Baker in this volume.