Competitiveness

9/11/2022

ASKED
 

Global competitiveness

The rethink of financial market regulation has begun

Interview with Thomas Richter, Chief Executive of the German Investment Funds Association BVI

Ursula von der Leyen, President of the European Commission, is concerned about the global competitiveness of the European economy. She announced the introduction of a standard competitiveness-check for EU legislation. Federal Minister of Finance Christian Lindner also believes that regulation has so far focused too much on financial market stability and consumer protection and too little on competitiveness. He points to the persistent low profitability of German banks. However, European asset managers are also increasingly being left behind by their US-American competitors.

Mr. Richter, recently the EU announced a standard competitiveness-check for EU legislation. You've been calling for that for years, haven't you?

That's right, we've been calling for some years for a rethink to make financial market regulation better and more balanced. So Ms. von der Leyen's announcement is good news for us. Up to now, the EU has based its financial market regulation solely on the two objectives of financial market stability and consumer protection. These are important objectives, but they are not the only ones. Location policy and economic concerns should also be included in regulatory decision making. This is the way it is in the USA. US regulation also addresses the important objectives of consumer protection and financial market stability, but it also keeps an eye on the interests of the local financial industry. With visible success. US asset managers have been growing faster than European ones for years, and same applies to banks. That's why the EU should now finally start to. The European fund industry faces global competition. No market can isolate itself. Against the backdrop of increasing pressure on margins, European asset managers need to focus on their global competitiveness.

What do you think is the problem with EU regulation?

The problem lies in the excessive detail of regulation. Compared to 2010, the minutiae of regulation from Brussels dominates our day-to-day business today. Almost weekly, the EU agencies publish hundreds of pages of technical regulatory standards, guidelines and recommendations. ESMA, EBA and EIOPA are much more than just supervisory authorities. They are a kind of shadow legislator. This growth in power was a response from the EU to the financial crisis, but it has increasingly taken on a life of its own. The EU has finally to ask itself whether consumers and regulators have been waiting for the sixth or seventh reporting, for example, and whether this reporting really still adds value, while it creates at the same time excessive costs on the industry side. Overall, the implementation of the many detailed EU rules burdens the fund industry with high costs. That money is then not available, for example, for further digitization or to enter into other markets.

What is necessary to bring about the rethink in financial market regulation?

It is important that the relevant EU agencies are required as soon as possible to take into account the global competitiveness of the financial industry in addition to consumer protection and financial market stability, when promulgating new rules. In addition, the EU should adopt a more principles-based approach to regulation. This means fewer detailed regulations and more basic rules that can be fleshed out at the level of the member states – of course in a harmonized supervisory system. In the end, we cannot go on being faced with a multitude of rules, the meaning of which is not always clear, and which are sometimes contradictory and cause collateral damage elsewhere.

The questions were asked by the internet editorial office.