As Michel Barnier, the European Union’s Internal Markets Commissioner, prepares to make his first official visit to the UK this week, I would like to welcome him on behalf of the City.
Despite reports that his appointment will damage our financial services sector – on the back of President Sarkozy’s perhaps rather provocative comments late last year – I have every confidence that together we can forge a constructive working relationship.
In fact, Commissioner Barnier has already told the Square Mile he will not be swayed by political agendas.
Instead he will be working to deliver reforms that benefit the EU as a whole while ensuring that London and other European financial centres can compete on a level playing field.
Good regulation can and should be a competitive advantage for Europe. So it is important that the industry engages with decision-takers like Commissioner Barnier – early.
This is highlighted by the legislative process around the controversial draft Alternative Investment Fund Managers’ (AIFM) Directive. If it had been implemented in its original form, this directive would not only have hit hedge funds and private equity based in London but also had severe unintended consequences for a broad range of other European industries. The fact that more than 1,600 amendments have been tabled by MEPs is testament to how unsatisfactory and ambiguous the AIFM was.
Getting this right is not something that can be rushed. Before any binding decisions are made about future EU regulation on topics such as derivatives and capital requirements, there must be ample time for analysis, consultation and impact assessment.
Policy makers should also take into account the cumulative effect of regulatory changes on the industry.
According to one recent report, the wave of proposed reforms being imposed on Britain’s banks could force them to raise $91bn (£58bn) of the $221bn the global industry needs.
Business driven out of London as a result of anti-competitive or protectionist regulation is more likely to go to the US or, increasingly, Asia rather than other European centres.
The time has come for politicians to start to lead the debate rather than simply reflect the populist sentiment of the day. We need serious analysis and discussion free from prejudice and national interest.
Only then will sensible regulation emerge that enables the financial services industry to play a full role in providing the capital and expertise needed to drive Europe’s economy forward.
I hope Commissioner Barnier and other EU decision-makers understand this.
Stuart Fraser is Chairman of the Policy and Resources Committee at the City of London Corporation.