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(Image from efutur.eu)Alastair Darling writes rather a thoughtful article in the Times today - see here.
I largely agree with him in most of what he writes, but I am puzzled by this:
"The EU also needs a single rulebook for financial regulation, covering banking, insurance and securities; and a mechanism for national supervisors to co-operate in its implementation. That is why under the Swedish presidency the EU proposes to establish three supervisory authorities, one for each sector.
We must resist measures, however superficially alluring, that could undermine the effective functioning of our cherished single market. National supervisors, such as the FSA, must remain responsible for supervising individual companies. Making companies directly accountable to more than one authority is a recipe for confusion."
My difficulty is that he appears to invite a single regulatory framework including single supervisory authorities for each area of the financial markets, but then seeks to retain the national supervision of individual companies.
This conflicting position doesn't bode well, it seems to me, when Nicolas Sarkozy is polticking about what in reality he sees as French dominance over the single market and the City - see here.
From the European perspective, it is emphatically not in the interests of the EU for a French type of regulatory framework to be imposed any more than it is sustainable for the UK to retain the framework that existed prior to credit crunch. Both frameworks had their weaknesses in the international marketplace for financial dominance and while it is correct to say that the UK's version achieved dominance in the EU, it is not to be assumed that that was the position against the City's competitors in New York or the far East.
I have repeatedly explained my view that the FSA failed to regulate certain aspects of the financial markets ... but that failure related to an underestimate or even a failure to comprehend the systemic risks assocated with certain products and ideas, along with a willingness to ignore the activities of the biggest players. In my view, it also stemmed from a failure to appreciate that the European ideas of 'purposive' regulation would not work in a fast moving and ever changing environment of financial services - although it has to be said that the US regulatory model also failed to assess the risks adequately leading to difficulties there too.
One of the more interesting aspects of British legal development is that often criticised use of Royal Commissions to investigate what has gone wrong and to come up with ideas for the future and to overcome to failures of the past. What we need to do is to ensure that the regulatory frameworks that we create for our financial institutions in the wake of the credit crunch are ones that are workable and that remove the emotion and narrow partisan politicking from the equation as much as possible.
What I think is required is transparency and clarity in regulation based on national regulatory bodies that work in the international markets beyond the EU as well as within it. We must not allow petty nationalist agendas from France or anywhere else (for that matter) to restrain the clear advantages that we in the UK and in the EU obtain from the City and its operations and the potential advantages that we can obtain from them in the future - and the EU should not be attempting to supplant the existing regulatory bodies. What the EU should be concentrating on is establishing minimum standards that enhance transparency and clarity and accountability and then leave the regulation to the national regulators.
The fact that the French President views a Frenchman's appointment to the EU Commission as being the start of a process that enable French ideas to dominate the debate in this area rather kills the assertion that the EU is in some way above the narrow political and nationalist agendas that dominated Europe in the past - perhaps the Japanese adage that business is 'war by other means' is the true view of the French establishment!
