Views on improving the integrity of global capital markets
29 March 2011

Is the Regulatory Pendulum Broken in the EU?

Posted In: Uncategorized

It was interesting to see the dueling articles in the 21 March edition of the Financial Times, in which DG Internal Market Commissioner Michel Barnier warned of complacency as regulatory reform stalls in the EU while European Fund and Asset Managers Association (EFAMA) head Jean-Baptiste de Franssu said let’s not move so fast. What a contrast. And what an accurate and troubling commentary on the state of play of regulatory reform.

Simply put, we’re stuck between two different ideologies. That pendulum everyone uses to describe the ebb and flow of reform — the one that oscillates between over regulation and under regulation — is dead in its tracks. You would be hard pressed to name one major reform on either side of the Atlantic that has been fully implemented and in place to prevent another crisis. No tinkering or proposed rules, but actual implementation.

The clock remains stuck, largely because commercial trade groups are fighting to ward off most of the proposals, declaring them either too costly to implement or fraught with “unintended consequences” and pointing to market recovery as reason to abandon major reforms. Meanwhile regulators and many in the investment profession are hoping to close the regulatory gaps exposed by the unprecedented financial crisis before it’s too late. [See the gaps (PDF).]

Here’s hoping that Mr. Barnier can reset the clock before time runs out.

About the Author(s)
Kurt Schacht, JD, CFA

Kurt Schacht, JD, CFA, is the Senior Head, Advocacy Advisor, Capital Markets Policy at CFA Institute, where he oversees advocacy efforts and the development, maintenance, and promotion of the highest ethical standards of practice for the global investment management industry.

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