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EDITOR’S TAKE: Franco German bluster on regulation is scary for City jobs

It may not have come to anything much, but this week’s posturing on financial services regulation by France and Germany was a little unnerving from the perspective of the City.

Although the summit failed to give birth to the new global regulator French and German statesmen (and women) were advocating earlier in the week, their enthusiasm for regulating global finance and squishing ‘Anglo-Saxon capitalism’ probably shouldn’t go unnoticed.

The US government was notably cooler on calls for a global financial regulator, claiming that: “Markets are global, but regulation is still the sovereign responsibility of governments.”

This puts the City in a interesting position. Following the last month’s Turner Review, the UK now looks likely to submit to European regulation in the form of a ‘College of Supervisors’ which both sets standards and ensures standards are imposed. As such, it would oversee the FSA.

Whether the College of Supervisors proves detrimental to the City’s interest will depend upon its construction.

If voting is on a majority basis and membership is allocated on the basis of member states, Harvey Knight, a regulatory consultant at Withers LLP and the former lead authorization and approvals lawyer at the FSA, says there’s a danger of vital interests of the City being voted against: “London is an outlier. Our financial markets tend to be more sophisticated, complex and global in their nature than other member states.”

At the same time, the City’s voice in the strengthened IMF and Financial Stability Board may also be in danger of European dilution. According to the Telegraph (admittedly not known for its pro-European stance), greater representation for China and developing countries will result in the UK being required to side with Europe on key issues.

With the US set to maintain its regulatory independence, the City’s inclusion in a vehemently anti-Anglo Saxon European regulatory block could yet prove damaging and cost jobs.

In an earlier article we argued that this would not be an issue and the College of Supervisors could even be based in the City. In fact, this seems unlikely: Knight points out that two of the three current regulators, the CESR and Ceiops, are based in Paris and Frankfurt respectively.

Comments (16)

  1. You guys just shouldnt have levered your houses and yourself up to the hilt for expensive Premier League tickets, plasma TVs and 500hp big block pick-ups.

  2. Well said “A German”. However, in my opinion, we ‘Anglo-Saxons’ can handle it. Sure, it means going through tough times for a few years and being laughed at (even) by the French and Italians (!!!!!). But well worf it.

    Duke Of Lancaster VI Reply
  3. I fail to comprehend how the French and Germans can criticise our financial systems, looking at the state of instutions such as Calyon and Deutsche Bank. The truth is is that the French economy has been weak for years, and as usual is using the British and the Americans as a political scapegoat

  4. If our financial systems are in trouble today it is because you British pushed us into making them like yours, which were supposedly better. We see where this has taken us now. Your financial systems were just based on pure absolute short term greed. Because of you we are facing times of great uncertaintly now but I can guarantee you on thing, you will never ever lecture us again on how to run our economy. Basta!

  5. This anglo saxon banking system that anonymous and his friends on the continent are criticising so much spurred the greatest economic and financial boom in the history of mankind! In the balance it will have created more wealth, despite the current crisis! Furthermore, this crisis is not simply the consequence of the bankers risk takings, it is also due to government policy around the world not including house prices in overall inflation computations thus giving rise to real estate bubbles through Greenspans encouragement!! This is hypocrisy on the part of the governments, including on continental europe! Britain has been the most dynamic economy in europe for more than a decade, and the US is the worlds biggest economy by a landslide , probably some things were being done right!! Certainly the sluggish french economy (for the past 20 years) is not a better model!
    Continental europe still has a lot to learn from the anglo saxon system!

  6. Ol,
    Some people never seem to learn…
    How many more trillions should be spent before you realize something went wrong with the anglosaxon model ?
    As for Britain the most dynamic economy… congratulations …
    Millions of British citizens are certainely sharing your point of you when they struggle to pay their bills and are stuck with debts …
    Good news is they’ll have to pay even more taxes thanks to this brilliant model …
    Bad news is millions of US and British are wondering where is the wealth you are talking about …
    Trillions of debts, Nationalized/bailed out banks, transparent hedge funds, Maddoff model, derivatives losses ….
    Best of …. British bank’s CEO confesses he had no clue what derivatives were about …. greatest model !!!!!!!
    Keep blaming govmts … I too blame them when they spend public fonds to finance some nationalized and bailed out banker’s bonuses …

    Britain a model for

    greedy City banker Reply
  7. well, I do no think Anglo-American model is any superior than Franco-German model. Isnt US and UK the biggest two beggars in G-20?

  8. @ol. Don’t get me wrong. I am a fervent supporter of capitalism, but not a capitalism where the wealth generated by a man’s work over his lifetime can be destroyed overnight, not a capitalism where some looser can make more money than a teacher by speculating on house prices making in the process the life of the teacher a misery. I warned my British colleagues 5 years ago that we were heading into a wall. It was easy to spot the crisis given the increasing disconnect between market prices and sustainable cash resources. All I found was deaf ears when I was not laugthed at. You are now paying the price of your arrogance.

  9. Well Anonymous, why if the Anglo-Saxon system is so wrong have you been living and working in London if you hate the Anglo-Saxon model so much? (you have British collegues so I assume you do work in Britain). And to suggest that we pushed banks on the continent is proposterous!! The truth is that French and German banks, took exactly the same risks as their Anglo-Saxon counterparts, and when you say we “pushed you” into changin your systems, how does that work?

  10. After all using easy monew, ie borrowed money, to spend on something you cant yet afford is neither AngloSaxxon nor FrancoGerman but human. And it is healthy for the economy. I think the systemic difference is that A/S societies trust in each individuals ability to know when it is enough, whereas the F/Gs systems tend to hit the brake via some form of regulation. Who is right? Currently the answer seems to be easy. In the long run? The boring answer is most likely “something in between”.

    A German loving London Reply
  11. @ Rob. We are talking economy and politics here so dont give me this fashist rhetoric. Yes I have been in the UK for years and enjoyed it very much. This is perhaps because I like this country so much that I am angry at it and as far as I know we are still free to express ourselves, right? By the way the UK and the US did force anglo-saxon style capitalism upon other countries. To say the opposite is pure hypocrisie. The likes of WTO, OECD, etc have been boasting the merits of your system for years leaving no room for any alternative. Perhaps you should show more interest in international politics to understand what I am talking about.

  12. You englanders deserve everything you get – you are a tiny island with a limited future.

    Klaus Isenbeck Reply
  13. Guys,

    I love your comments about the weak French and German economies… I am maybe mistaken but both France and Germany have higher GDP than UK ($2.5tn and $2.8tn vs $2.1tn for 2008). So yes, it is true that England has attracted the best French and German who are now managing a large chuck of the IBs, HFs and AMs of the City. Yes, England was paying 3-5x more than France and Germany. Yes, England HAD a more attractive tax system than France and Germany… But now… what do you have to offer to us?

  14. @ Rob. It seems that you haven’t read my previous post in detail. I did not turn my back on the UK as soon as things turned sour. I have never turned my back on this country to which I owe so much. In fact I have been highly critical of the current economic system for years because I knew it was going to end with a bang and cause havor to this country and others. But you are quite right when you say that greed is now widespread in Europe. Unfortunately, we are now back to 19th century Europe and its aritsocrats who thought they knew better. It’s not exactly what I call a step forward socially. And believe me when I say that millions across Europe take the UK and the US responsible for this.

  15. Alsex, ever heard of something called GDP per capita?

  16. Firstly Anonymous you should read my messages, I did not say “turn your back” I said that you “criticise it” and Alsex I dont know where you got your figures from, although Germany is above Britain, France is not https://www.cia.gov/library/publications/the-world-factbook/rankorder/2001rank.html. Furthermore London is STILL the financial centre of the world, even with added regulation it will be hard pushed to be as backwards as the French system, which resembles ours in the 1970’s.

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