EU financial services must compete globally

Stuart Fraser
IN January 2011, Hungary will take up the presidency of the European Union and no doubt next year’s agenda will be a full one.

In addition to key legislative proposals covering areas such as short selling and over-the-counter (OTC) derivatives, the Hungarian presidency will also oversee the setting up of the new European regulatory framework and the agencies designed to enforce it.

Indeed, during the next 12 to 18 months, decisions taken at a European level will impact upon not only the standing of the EU but also the standing of each of the 27 individual member states in the years to come.

That is why, alongside the Lord Mayor of the City of London, Michael Bear, I recently visited Hungary to offer our support and to learn what the Hungarian government’s priorities are for the six months when it will hold the presidency.

With every single member state in the EU having been hit hard by the global financial crisis, promoting financial services may not seem like a top priority, especially in countries where this is not yet a key industry.

And yet, if we are to achieve our shared agenda of generating growth and creating jobs, support for the EU-wide financial services industry is absolutely key, especially with funds so scarce in the public sector.

In spite of the political pressures, the UK government has recognised that without a globally competitive financial services industry the road to economic recovery will be longer, harder and fraught with danger. EU policy makers must do the same.

So while proposals covering highly specialised, innovative products such as OTC derivatives might not seem relevant to European countries with less developed financial services industries, they are in fact inextricably linked to their future prosperity.

Without them, other sectors will struggle to generate the growth needed if the EU and its 27 member states are to take their rightful place in the new, post-crisis world order.

Of course the City understands, and indeed welcomes, proposals to introduce greater stability and to reduce excessive risk-taking, but any new rules must be proportionate.
They will need to be underpinned by a full and proper consultation process, comprehensive impact assessments and due consideration of the cumulative impacts these reforms may have.

We should avoid taking unilateral actions out of step with the global agenda, no matter how politically expedient they may seem. It is important to raise funds but short term benefits must be balanced against long-term growth.

Many sectors within the financial services industry are highly mobile and it is no good creating a level playing field within the EU if we can not compete in the global marketplace.

The City of London is acutely aware of this and, following my trip to Hungary, I hope the Hungarian government is as well.

Stuart Fraser is the policy chairman at the City of London Corporation