In its response to an EU sub-committee’s inquiry into EU financial regulatory framework, the WMA said there is “little coordination” between MEPs and Westminster MPs, and that MPs “rarely demonstrate” knowledge of European financial reformation schemes, such as Markets in Financial Instruments Directives II (MiFID II) and Solvency II.
“The UK’s financial services industry is the largest, most diverse, and most sophisticated in Europe, and the UK, EU, and Europe more widely benefit from its existence,” it said.
It added that the UK cannot block proposals on the grounds of impact on its financial markets, despite a number of other EU member states which do not have such an extensive range of markets being able to vote on how it is regulated.
“The value of financial services to the UK economy places it in the category of a key national interest, and it should, on occasion, be defended with the same zeal.”
“Caught” by legislation
In the response, which was published at the end of September, the association said the EU’s financial reforms have failed to differentiate between financial services sectors, damaging some areas that did not need reforming.
“Very small, non-systemic firms have thus been caught by legislation designed for large cross-border institutions, resulting in high costs and reduced competitiveness, rather than better legislation,” it added.
It said that the reforms had failed to predict or deal with future asymmetric shocks such as the 2008 financial crisis, citing MiFID II as a “particularly good example of just how inefficient and ineffective legislative processes can be”.
The association expressed particular concern at the effects of reform upon the retail industry, suggesting that developing alternative finance products showed the EU’s “lack of understanding of markets and investor protection requirements”.
It added that the reforms will reduce available product range, restrict choice, limit competition and impose low returns within the retail market, and will also increase costs, subsequently reducing the number of consumers who can afford advice.
However, it said that the biggest risk to the retail financial services industry was of a “one-size-fits-all” regulation being developed to tackle eurozone issues and then being automatically applied to non-eurozone member states without their mutual consideration or participation.
John Barrass, deputy chief executive of the Wealth Management Association, added: “When legislating on retail markets, we would like to see EU legislators use directives, which are more appropriate to local markets, rather than regulations, which may turn out to be inappropriate and a method of applying an unsuitable ‘one-size-fits-all’ approach.”
Proper time and consideration
In June, Peter De Proft, the director general of the European Fund and Asset Management Association, said Europe has felt “rushed” into MiFID II’s implementation.
Following a discussion on EU regulatory initiatives at the group’s annual general meeting, he said: “The consensus is yes, of course we want transparency, but this important piece of legislation should not be rushed through.”
“There needs to be proper time and consideration given to this, let’s create a perfect framework and system that benefits clients.”
MiFID II, which will not be fully implemented until 2016, aims to address the residual effects of the financial crisis by improving financial market transparency and strengthening investor protection within the insurance and investment market.
