
EU regulation will restrict financial services growth
Daily news headlines
LONDON – Research prepared by London Economic and published by the City of London Corporation indicates tighter EU regulation could substantially reduce growth in the financial services industry.
This is the third edition of the annual report, The importance of EU wholesale financial services to the EU economy, prepared by London Economics for the City of London Corporation. The study – commissioned as part of the City Corporation’s ongoing research programme – predicts the credit crunch will cause 75,000 job losses across Europe, mostly in major investment banks. Other financial services sectors – such as insurance and commodities – should be more resilient.
The report identifies five key factors that will determine the performance of the financial services industry over the next five years: the regulatory environment; the state of the world economy; the evolution of domestic savings; competitive pressures from outside the EU; and changing business models.
The study presents several scenarios for the evolution of the financial services industry to 2012, each assuming a different combination of positive and negative influences from the key factors. The most likely scenario, however, shows financial services gross value added (GVA) falling by 8.3% over 2007–2009. The industry is expected to recover in the medium term, though, with GVA in 2012 reaching 0.7% above 2007 levels.
Stuart Fraser, the City of London’s chairman of policy and resources, said the proposed amendment to the EU Capital Requirements Directive was a particular concern as the change would “greatly increase the cost of capital across Europe, with detrimental effects far beyond the financial services industry. Any new legislation should be developed according to the EU’s own principles of better regulation, including a reasonable consultation period and a full impact assessment – so far, we have seen neither”.
He added: “Sensible, principles-based regulation will help the EU to maintain its competitive edge as the world’s largest exporter of wholesale financial services. There is a lot at stake here. Not only do 1.4 million people work in the sector across the EU, but financial services are also a driving economic force, accounting for two-thirds of labour productivity growth in 2000–2007. Worse still, this regulation would drive the whole industry overseas, taking many jobs with it. ”
“There is probably a temptation to react by throwing a heavier rulebook at the problem; we must resist that urge because it will not only hamper the industry but confer a false sense of security from future shocks.“This report makes it clear that the financial services industry faces difficult times ahead. Some of the challenges – like the health of the world economy – are outside the control of EU governments. But Europe can act now to make sure financial regulation is part of the solution, not part of the problem.”
You can access copies of the report by clicking here
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Risk management
US Basel endgame hits clearing with op risk capital charges
Dealers also fret about unlevel playing field compared with requirements in the EU
Calibrating interest rate curves for a new era
Dmitry Pugachevsky, director of research at Quantifi, explores why building an accurate and robust interest rate curve has considerable implications for a broad range of financial operations – from setting benchmark rates to managing risk – and hinges on…
Bankers – shape up or ship out, says UBS compliance head
Tough approach comes as ECB prepares new guidance on conduct risk for 2024 release
Op risk data: WhatsApp fines keep on coming
Also: ‘Five families’ stock-lending cartel pays up; double hit for Wells Fargo. Data by ORX News
The impact of emerging risk on credit portfolio management
Bank credit portfolio managers are increasingly finding that non-financial risks, such as cyber risk and climate risk, are falling under the remit of credit portfolio management (CPM). This will also be impacted by the upcoming Basel III Final Reforms,…
Bankers call for overhaul of EBA stress tests
Support for multiple scenarios, but only if fixed assumptions and variables are scaled back
Do all roads lead to multi-scenario Fed stress tests?
This year’s CCAR faced criticism for underweighting the risk of higher-for-longer inflation
Vendors under new scrutiny in CFTC due diligence push
Planned cyber resilience regime will force dealers to subject “critical” tech vendors to stricter audit