British bankers have called for a review of post-crisis financial services laws, as part of reforms for better regulation from Brussels, which include a strengthened role for national parliaments.
Some regulation brought in after the financial crisis was “problematic” because of its impact on the economy and financial services, a report published by the TheCityUK, said.
The necessary speed of the rules to bolster financial stability meant that there was not enough time to evaluate their individual or cumulative effect, the report said.
The European Commission’s “Better Regulation” strategy should be used to look again at the rules, according to the report, which set out recommendations for its improvement.
The CityUK represents British-based financial services firms. The City of London is the EU’s financial hub, with many global players using it to access the EU’s Single Market.
British Prime Minister David Cameron has demanded reform of the EU as a condition for his support for Britain staying in the EU, including a focus on “better regulation”.
UK Commissioner Jonathan Hill, in charge of financial services, has said the time may be right to look again at some of the rules brought in at the height of the crisis.
During the crisis, policymakers were forced to legislate at speed “with the flames lapping at their feet”, he said in February. “It makes sense to look at the effect of that regulation over time,” he added.
At a launch event in Brussels yesterday (1 July), Alan Houmann, head of government affairs for Europe, Middle East and Africa for Citigroup, said the cumulative effect of post-crisis regulation was hindering jobs and growth.
Houmann, who oversaw the report, added laws around data privacy, bank structure reform and the Financial Transaction Tax were “job-destroying pieces of legislation”.
There should be mandatory reviews of all EU rules by parliaments after they are put on national lawbooks, the report said.
Every new bill should also be looked over by MPs before it becomes law, the report said. Feedback should influence negotiations over laws between the Council of Ministers and the European Parliament over pending laws.
Eventually the timeframe when parliaments can use the early warning “yellow card” system should be lengthened to three months from two, said the report.
The threshold for when the procedure, which allows states to submit an opinion against a bill, should be dropped to a quarter of national parliaments.
All EU rules should be examined to evaluate their cumulative effect, rather simply on a stand-alone basis, the report said.
Analysis of the cumulative effect of regulation should become part of the Commission Regulatory Fitness and Performance Programme (REFIT), which checks the efficiency of existing EU law.
In December 2018, the European Commission announced reforms to its Impact Assessment Board. It was renamed the Regulatory Scrutiny Board and has powers to review existing and pending EU laws.
The report said the new Regulatory Scrutiny Board should be turned into an independent body, accountable to the European Parliament, to overlook impact assessment studies on behalf of the major EU institutions.Impact assessment studies are research on the effects that a new law could have on, for example, the market.
EurActiv reported in December that Commission First Vice-President Frans Timmermans, the “better regulation” chief, thought the board, which currently only works for the Commission, could one day evolve into an independent watchdog.
Stefano Sannino is Italy’s permanent representative to the EU. While agreeing with better regulation in principle, he warned against the risk of creating too many layers of bureaucracy.
“We should be careful to avoid such a bureaucratic process,” he said, “Otherwise we will have the worst of both worlds.”
He cautioned that the UK could not expect a “blank cheque” when it came to EU reforms.
Fears over eurozone influence
84% of TheCityUK members said the UK should stay in the EU, said Chris Cummings, the chief executive of TheCityUK. But many also said the bloc needed reform, he warned.
The advent of Banking Union, with all eurozone countries sharing a central bank, has raised fears over the euro area using its heft to secure unfair influence over financial services regulation.
The report asks that non-eurozone members have permanent observer status at the Eurogroup meetings of euro area finance ministers, and that the Eurogroup chairman becomes a permanent but non-voting member of the European Council.
It also recommends giving the three EU-wide financial regulators, the European Supervisory Authorities, more responsibility for ensuring the coherence of the Single Market and to boost their involvement in earlier stages of policymaking.
But the report stressed that the regulators should not be given anymore oversight powers.
Jean-Claude Juncker, the new President of the European Commission, pledged to refocus the EU executive on the bigger political issues of the day and cut regulations seen as unnecessary or hampering business activity.
Juncker nominated his First Vice-President Frans Timmermans in a new role watching over the subsidiarity principle, whereby the EU should only intervene where it can act more effectively than national or local governments.
Timmermans led a screening exercise into pending legislation as part of the "Better Regulation" strategy.
After the financial crisis, EU policymakers brought out a slew of legislation to bolster financial stability. British-based financial services firms wants those rules re-examined under the Better Regulation processes.
The City of London is the EU’s financial hub, with many global players using it to access the EU’s Single Market. British Prime Minister David Cameron has demanded reform of the EU as a condition for his support for Britain staying in the EU, including a focus on “better regulation”.