EU-led regulation is rough around the edges: FCA

David Lawton, director of markets at the FCA, and Christopher Woolard, director of policy, risk and research at the FCA, told a House of Lords committee that legislation introduced in the aftermath of the financial crisis had been done on the basis of an “ambitious agenda”.

At the EU Economic and Financial Affairs sub-committee, Mr Lawton and Mr Woolard were questioned by chairman Lord Harrison on how successful and relevant EU-led regulation had been to UK financial services.

Mr Lawton said: “It has been a mammoth undertaking on the part of the EU to bring 41 pieces of legislation since 2008, but overall our assessment is that it has been a thorough and effective response.”

He added there have been a number of rough edges, and the entire industry “faces significant implementation challenges”.

Mr Lawton was questioned by Lord Davies as to whether the UK’s new regulatory regime inspired confidence in the British public, and whether speculation about the UK’s membership of the EU had reduced the credibility of the FCA when negotiating with fellow EU regulators.

He said: “Our counterparts in the EU are respectful. In the EU we are respected because of our technical expertise. I sense no loss in influence because of the broader strategic concerns of government policy.”

Mr Woolard also said the programme around the Markets in Financial Instruments Directive was one of the EU’s regulatory success stories, although the Alternative Fund Managers Investment Directive could have gone better. He said: “There was too high a degree of prescription with a lot of difficult negotiations.”

Mr Lawton and Mr Woolard both told the committee that care needed to be taken to make sure that individual markets within the EU would be considered in the light of future regulation, so that rules would be proportionate and relevant for each market.

For example, Mr Woolard said that if the EU were to introduce 20-year analysis of interest rates to mortgage customers in the UK, it would be almost meaningless.

Adviser view:

Stuart Dewin, chartered financial planner and director at Questa Chartered in Blackpool, said: “In terms of changes in the financial services industry, RDR is the best thing that has happened.

“It has raised the bar in terms of qualifications, giving people confidence that they are talking to trusted and qualified financial planners with the same standards as other professions such as solicitors and accountants. It has also moved perceptions away from financial advice being product- and commission-biased.”