Separate Scottish regulator means more cost and complexity

Owen Kelly, chief executive of Scottish Financial Enterprise, told the Scottish Affairs Committee today (26 February) that most if not all of its 200,000 members served English customers and had benefited from one of the few examples of a genuine single market in the world.

Mr Kelly warned MPs at a hearing on the upcoming independence referendum that it remained an “open question” as to whether providers could effectively maintain an English customer base without the additional expense and administration of dealing with two regulators.

Mr Kelly said: “It seems clear that if Scotland becomes a separate jurisdiction, the current market becomes two markets, and that introduces the requirement to have a new regulator. That is not optional, it is part and parcel of EU member state obligations.

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“If you did not have any UK-based customers, you might just see that as replacing one regulator with another, but pretty much all our members have English customers who still need to be regulated by FCA.

“It is difficult to see how dealing with two regulators won’t lead to additional cost and complexity. That is inescapable and will be ultimately be paid by customers and companies.”

Professor Iain MacNeil, a specialist in financial services regulation, also told the committee that the EU single market remained a “misnomer” in financial services, arguing that British companies would baulk at the extra requirements imposed by a necessary state regulator.

He added: “One of the major concerns among providers is the cost of regulation, which has gone up since the financial crisis. The prospect of another major recalibration further down the line would be a very unattractive proposition for many firms.”