Regulators and banks bury the hatchet
Whisper it, but regulation is getting better. It’s still growing — there were nearly 2,000 pages to pore over this week — but the détente between the financiers and legislators is starting to deliver.
Since Jean-Claude Juncker took over as president of the Commission last year, relations between the European authorities and the financial sector have warmed. It’s been wrapped up in a series of soundbites about small and medium enterprises, jobs, growth, but he’s been talking the talk.
Initiatives to promote infrastructure financing, review regulation, and build a genuine pan-European market for capital have all seemed laudable, and the finance industry has welcomed every one of them.
But a nagging scepticism has remained: could the Commission really be serious?
To a man with a hammer, every problem looks like a nail, and to the Commission of old, every problem looked solvable with a new block of intrusive regulation.
But perhaps this impression is wrong.
The proposals on Capital Markets Union published this week show every sign of having listened to the industry where it counts. The Commission incorporated suggestions from a group of securitization lawyers on how to phrase CLO regulations, for example, making tiny changes that avoided senselessly killing a market that drives capital to European business.
Changes to the MiFID rules, published by ESMA this week, have also averted possible disaster — again, with a small, highly technical change.
Banking sceptics will call this regulatory capture, but it’s just good policymaking.
Politicians and bureaucrats shouldn’t regulate health policy without talking to doctors and patients, and neither should they make financial policy in an ideological echo-chamber.
Nearly everyone accepts they are living in a tamer, less swashbuckling, and more compliant world, and in many cases new regulation can open up new opportunities — trading transparency, for example, done right, can transform fixed income much as it already transformed equities.
So if this week's indications are correct, and the Juncker Commission will follow through on its early promise, the financial sector has a real reason to be cheerful, for once, about its regulatory future.