FSA chief hits out at EU directive |
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Sat, 23 Jul 2005 11:35
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LONDON: The Financial Services Authority (FSA) chief Sir Callum McCarthy yesterday lambasted a proposed EU directive terming it as 'deeply unsatisfactory.' The Market in Financial Instruments Directive (MiFID) deals with the way financial service firms handle markets for retailers across the borders of EU member countries.
McCarthy felt that the proposed legislation was being hurried through without being subjected to a full cost-benefit analysis. He observed that such a major legislation was set to be passed without knowing whether it would bring any benefits. "It is already clear that the MiFID changes will impose significant costs on the UK market," Sir Callum added.
The MiFID directive seeks to compel firms that deal with equities, bonds and other securities to inform their clients about quotes from other firms. In order to comply with the rules, firms will also need to purchase new IT systems and upgrade all their existing facilities as well. This process could end up costing close to £1 billion for firms in the UK. Small and medium business firms cannot afford such high costs and could end up showing a negative balance.
"Industry is understandably concerned about the potential scale of these costs and I share these worries. It is far from clear the benefits will outweigh the costs. The present weight of regulatory initiatives affecting financial services represents a significant hazard," Sir Callum said at the annual meeting of the FSA yesterday.
He also took serious view of the fact that such measures could be burdensome to the financial services and came out in support of Europe’s Internal Markets Commissioner Charlie McCreevy, who is working towards making sure that the directive did not prove to be unnecessarily costly to the services. "We are also acutely aware that, to those affected by them, it does not actually much matter from where particular regulatory initiatives originated," he pointed out. Sir Callum promised that the FSA would works towards trying to ensure that the directive would not affect the services adversely.
Sir Callum also revealed at the meeting that he had received a reply to the letter that he had written to Prime Minister Tony Blair who had said that the FSA was "seen as hugely inhibiting of efficient business." However, he chose not to reveal the details of this correspondence and said that the matter was now closed.
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