Although the UK has the largest financial services sector in Europe, it will only have a small voice over EU regulations
Sir, We are concerned that hasty agreement to EU proposals for financial services regulation has pre-empted the discussion of what would be best for the EU as a whole. David Charter’s article (“Jubilant Sarkozy sees EU take powers over the City", June 20) appears to confirm the handover of financial services regulation to EU executive committees. Monitoring UK compliance with the rules will be largely left to the British Financial Services Authority (FSA) but the rules themselves will be written in Brussels. For the time being the UK has by far the largest financial services sector in Europe, but it will only have a small voice, just one of the 27 voting members, in determining what the new rules will be and how supervision takes place.
Due process seems to be flouted: the FSA’s call for consultation on this matter closed only last week with some organisations being given more time and the EU consultation on the communication closes in mid-July. We support the internationalising of financial services regulation but moving the regulation of one of the largest and most sophisticated markets immediately to a body with executive responsibility for a miscellany of markets in different stages of development threatens to undermine EU financial services competitiveness in the world market.
The EU formal legislative process has only progressed as far as a communication, albeit effectively a draft directive. The Treasury has yet to issue a draft British Impact Assessment as it should have done by now. The EU Impact Assessment fails to make the case for these changes, still less to quantify costs and benefits of this new agreement for the EU.
Next month the Adam Smith Institute’s Regulation Evaluation Group, of which the undersigned are members, will publish its full response to the EU communication in the form of a report that considers the optimal financial services regulatory arrangements for the EU as a whole. The blueprint for all this was written by a team led by a former governor of the Bank of France, and supported in a letter from Alistair Darling to the Commission President, dated March 3, 2009. It would appear that agreement in principle was the price of French involvement in the recent G20. The UK Government appears to have negotiated some minor opt-outs, such as the EU committees not being able to commit member state governments financially but to claim credit for recovering £1 from £100 given away is perverse.
London’s pre-eminence as a financial centre is as dependent as ever on its fiscal and regulatory environment. As a result of the pending increase in the UK marginal tax rate to 51.5 per cent, including national insurance, we know a significant number of firms were already considering moving to Switzerland. The prospect of this takeover of financial regulation can only hasten this exodus.
Tim Ambler, Eric Anstee, Keith Boyfield, Eamonn Butler, Tom Clougherty, David Foxman, Michael Green, Richard Jeffrey, Hugh O’Donovan, Edmond Robinson, Mike Waterson
Adam Smith Institute, London SW1
Published in The Times here