THE future of the European Union (EU), and the economic prospects of member states, continues to be the subject of intense scrutiny. Even a Royal engagement has not pushed the crisis headlines off the front pages.
European countries are not alone in facing fiscal adjustments in the wake of the financial crisis. Ensuring these changes are smoothly managed is a crucial challenge for leaders.
The City of London Corporation has forged strong ties in Europe to ensure the UK financial services industry is well represented in such debates.
Indeed, I will be visiting Budapest later this week alongside Lord Mayor Michael Bear to flag up key issues ahead of Hungary’s EU Presidency.
The European Parliament will shortly begin considering proposals on over-the-counter (OTC) derivatives, central counterparties and trade repositories. This will be followed by amendments to the Markets in Financial Instruments Directive, the Capital Requirements Directive and the Market Abuse Directive.
As Europe accounts for more than half of all global OTC derivatives activity, the outcome of these measures will have a significant impact on the EU economy.
Consistency will be crucial across these measures, but the European Commission also needs to work with its US counterparts to ensure that our competitive position is not damaged.
The need to engage hard, fast and early with EU stakeholders was demonstrated by the legislative process around the Alternative Investment Fund Managers Directive.
This began with a draft, preceded by minimal consultation and unaccompanied by impact assessments. The early proposals would have damaged key markets and restricted access to capital and to a wide range of investment products. We have now reached a much more acceptable compromise – but only after 18 months of hard work and intensive dialogue.
Global problems require global solutions. But it is not just wider reforms that matter when it comes down to day-to-day business. The way domestic regulators interpret and act upon such agreements is an equally important factor in determining how competitive we are in international markets.
We are approaching a tipping point.
During my recent visit to the US, companies expressed reservations over investing in the UK due to an overly aggressive approach to regulation. It is vital that we replace this negative perception with a positive one – that the UK is open to business, and home to a stable regime for regulation and taxation.
Without this, the City will find it increasingly difficult to attract and retain international investment in the future.
And equally important is the new business we risk missing out on if decision makers choose to plant or expand operations elsewhere.
Stuart Fraser is policy chairman at the City of London Corporation