The idea has been subject to a bit of push-back with some worrying that a new “financial services tsar” will turn against the City, while making it more likely that the Commission develops a Eurozone-bias in its financial services legislation. The British Bankers’ Association has come out against the idea, for example.
There is undoubtedly a risk here: if a free-standing financial services brief goes to a candidate who is anti-free markets, doesn't get financial services and who wants to pursue Eurozone-tailored solutions at the expense of the single market, then of course, it would be a bit of a disaster. However:
- Remember, we’ve lived with a 'financial tsar' over the last fine years. His name is Michel Barnier. Though there are now those within the UK Government who say Barnier “wasn't that bad after all”, it was clear that he saw his primary mission as restricting and controlling financial activity. He focused almost all his energy on this to the detriment of wider internal market issues.
- Under Barnier’s watch the integrity of the single market has been mostly protected – for example there are now non-discrimination provisions in laws such as MiFID and EMIR – however it has been and remains a daily struggle and most of these protections were inserted by member states during the negotiation process. Let’s not forget, this is the man who has played a leading role in the drive for a Financial Transaction Tax and the banker’s bonus cap. Furthermore, the original proposal for a eurozone banking union transferred huge amounts of power to the Commission and put a eurozone focused brief right at its core (to the chagrin of more than just the UK).
- More importantly, however, while financial services is hugely important for the UK national interest, it’s not the only interest. The problem with merging financial services and the wider internal market is that the latter tends to get neglected given all the focus on the likes of banking union and regulating sprawling multinational financial institutions. An active Commissioner dedicated to liberalising the single market in services, digital and energy could be hugely beneficial at the moment, particularly since the appetite for a new push in some of these areas may be growing across Europe. Also, this will form a key plank in Cameron’s renegotiation strategy.
- Splitting off financial services is the only chance the UK has of getting internal market – which even without financial services (for the reasons described above) would be a big prize.
- While it is often said that keeping financial services inside internal market ties it to the single market, the point also runs both ways. For example, outside the internal market brief, more attention may be paid to the legal justification for financial services regulation rather than it simply being pushed through under a single market justification as is usually the case.
- In terms of Eurozone-bias – we’re as concerned about it as anyone, as we flagged up as early as 2011 (though we don’t believe that the Eurozone will organise itself as a perfectly coherent entity any time soon) – the key for this is to keep financial services as far away from the Economic and Monetary affairs brief as possible, which for the most part looks to be taking place.