What we need are regulators with experience of the real worldJanuary 18, 2011
Opinion piece by Baroness Jo Valentine, Chief Executive, London First, which appeared in the Evening Standard (January 18)
So, European financial regulatory bodies are to be headed by a Dutch professor (Capital markets regulator), Portuguese solvency guru (Insurance and pensions regulator) and an Italian centralising policymaker (Banking regulator).
The good news is that the appointments have been made quickly. And it would be difficult to argue that the new bodies are unnecessary. At least part of the reason for the credit crunch and the subsequent damaging global recession was a failure of supervision – not necessarily of rules, but a failure to effectively monitor or enforce them.
The banking regulator will be based in London, the capital markets body in Paris, the pensions and insurance body in Frankfurt. It isn’t a surprise that the Banking regulator isn’t being headed by a Brit, since the etiquette demands that the country of location doesn’t supply the chair or CEO.
But it is disappointing that none of the three appointees has experience in the London market – though it is Europe’s biggest by a clear order of magnitude. None of the candidates has recent direct private sector experience –they are all either career policymakers or academics. London is a precious jewel for European business – a deep and liquid source of capital and of expertise. But because of the petty politics of Europe, it is also viewed with a mixture of envy and suspicion by European political leaders and policymakers. This isn’t a chauvinistic point. Success wouldn’t be three chairmen wearing union jack underpants, it would be Europeans (or even heaven forbid, non-Europeans) with real world, private sector experience in London and elsewhere. Poachers-turned-gamekeepers, if you like!
But UK Government and the FSA missed a trick in not nominating top people for the roles sufficiently early. It’s symptomatic of our wider relationship with Europe. European regulation is always presented as a threat, something bad will happen to us if we don’t seek to change loopy draft directives emerging from Brussels. Why aren’t we in there earlier, setting the agenda, initiating the legislation, shaping the argument? And there’s a cultural problem, in that the best people to lead these supervisory bodies wouldn’t necessarily be attracted to work in them. There will be less adrenalin than the working environment they are used to, less rough and tumble, and frankly, less reward.
In a world of increasing global competition, Europe needs its own leading financial and trading centre. London may be neither a favourite nor fashionable champion, but it is our best bet if European businesses are to continue to succeed in the rapid growth markets of South America and Asia. To ensure that London’s financial markets are secure but dynamic assets for Europe requires the new bodies, with their highly credible but academic chairs, to be staffed by practitioners, be they from London, Frankfurt or even Zurich. Regulators with practical real-world experience will make regulation more savvy in its design and implementation, and as a result, more effective on behalf of business and consumers.