The Belgian moratorium on selling complex structured products has hit competition and created an uneven playing field, according to panelists at the Swiss Futures and Options Association's 33rd Bürgenstock meeting in Interlaken this morning. Belgian Financial Services and Markets Authority pushed financial institutions to sign up for the voluntary moratorium last year.
"I think there is one big lesson and that's that the Belgian financial sector was maybe too proactive and too passive by signing up to a voluntary and temporary ban, and they have effectively given a blank check to the regulators as it has taken away the incentive for the regulators to provide final legal rules," said Tom Van Dyck, lawyer at Liederkerke in Brussels, on the European Lawyers on current Structured Product Developments panel.
The moratorium has distorted competition. "There may not only be an uneven playing field on the local basis, because the lack of legal rules sometimes results in varying guidance that might differ for issuer X to issuer Y. But, also internationally, because for instance Belgian investors have lost access to certain complex structured products on Euronext Brussels, whilst the same products are listed on other exchanges outside Belgium and can be accessed by these same investors."
In Europe some regulators have proposed legislation, which if enforced, would also ban products they feel are too complex for the retail market and so level the playing field for Belgium. The European Markets and Securities Authority is producing technical standards for the Markets in Financial Instruments Directive, which is intended to be submitted to the European Commission for endorsement by Sept. 30. "If ESMA decides to impose a product ban, that ESMA action would prevail over any member state action. This would mean that our Belgium moratorium could not be sustained...this would create a level playing field as everyone in Europe would have to play by the same rules," said Van Dyck.
While some member states are concerned that ESMA will produce standards that impose a ban, Enrico Friz, partner at law firm Walder Wyss in Zürich, said, "Today we are not too concerned that Switzerland could follow the same way that the European ruling is going."
