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Monday, August 04, 2014

Would a stand alone financial services commissioner be a curse or a blessing?

There’s a bit of a debate going on at the moment over whether splitting up the internal market portfolio in the next European Commission is a good or bad thing for UK interests. The idea is to separate financial services from the wider internal market portfolio, to create a more manageable brief and avoid a scenario whereby an activist Commissioner turns this portfolio into a financial services one anyway, neglecting the many other crucial single market issues such as professional services, energy and digital services.

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. 
So it could go go either way. However, you have to compare it against what has gone before and what the likely alternative is. Cameron would have to screw it up badly to make the de facto division of labour worse in this area than what was the case in the previous Commission.


Anonymous said...

If it comes under EU control then it will be a disaster. But then again, anything that the EU touches sooner or later turns into a disaster.

Just look at the Portuguese banking system (and others too). They have had bailout funds to use but have not used them.

Anyone for another EU Banking stress test?!

No thanks.


johnlandseer said...

Openeurope - this write-up is an appeasers or EU apologists charter.

Plus, the UK has next to no chance of getting the internal market role.

Not sure what it is you guys are smoking - 'tis not good for you.

Rollo said...

Look: first sensible thing I have heard from Darling: During the debate, Darling pressed Salmond on his “Plan B” in the event that the rest of the UK decided not to allow an independent Scotland to keep the pound, arguing that since the Scottish Nationalist Party has ruled out joining the euro, the only alternative would be for Scotland to continue using the pound but without a formal currency union; a scenario he described as “disastrous” for Scotland’s financial services industry. Citing the eurozone as an example, Darling described a currency union without political union as “stupidity on stilts”.
Guardian FT Times Independent Mail Sun Mirror EUobserver ICM poll.
Funnily pundits are saying the Eurozone problem is solved.

R Davis said...

Are all these acts, provisions, law, etc., for real ?
You see most business globally is done under the table, behind closed doors & in secret. So it is just a pretend, a charade, to hide the fact that everyone is getting away with not paying taxes, not polluting, not adhering to rules /laws.
The reality is that it is a banshees picnic out there.
Democracy is not the way of aristocracy & certainly not a royal by any name.