financial sector

I don’t think what’s written is anything that anyone would take difference with – it’s a matter of implementing those words more so than the intent behind them.  The key here is international consistency and sensible regulation – in the wake of the crisis, we have seen the EU take a heavy hand with market sectors and participants that were not the cause of the credit crisis.  No one argues the need for more oversight of systemically important players, but there is a serious question as to what is accomplished by placing a higher regulatory burden on actors who do not pose systemic risk – particularly if that regulation also brings little tangible benefits in investor protection.

The international dimension is also key in this argument – by enacting regulation that imposes drastically different requirements on companies operating in Europe than in other parts of the world, the EU risks fragmenting the global capital markets and potentially putting European firms at a competitive disadvantage.  Recent legislation and/or proposals that would impose requirements that products be originated or key functions carried out by EU-domiciled and regulated entities risk jeopardising the continuity of international markets, leading to limited choice and increased cost for European investors.

On central supervision, this isn’t necessarily a bad thing, but getting the Member States to cede the sovereignty to oversee their own financial markets in order to achieve this is easier said than done.  As for the role of the ECB – the mandate and composition of the ECB would have to be dramatically altered to give them any type of supervisory or enforcement powers.  Furthermore, how do you deal with countries outside the Eurozone – especially the UK, where a majority of European financial market activity takes place?