Speech by the Financial Secretary to the Treasury, Mark Hoban MP, at EuroFi
Speech by the Financial Secretary to the Treasury.
Prospects of future G20 discussions and expected impacts for the EU
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1. I believe that we have much to learn from the history of the EU and our single market. Enhancing competition, promoting transparency and up-holding principles of non-discrimination have been critical in driving economic growth across the EU.
2. In financial markets, the Single Market opens up trade, reduced costs for business and provides choice for consumers.
3. If the events since 2007 have taught us anything, it is that the financial services sector is a truly global industry.
4. We need to recognise that there can be no recovery without decisive and consistent action across the G20, to build a strong, well regulated, global banking system.
5. As a first step, I welcome the recent agreement reached by the Governors and Heads of Supervision on Basel III. High capital standards strengthen banks and protect tax payers.
6. But looking ahead, there is still more work to be done to deliver on our G20 commitments: to tackle sources of systemic risk and strengthen the infrastructure that supports global financial markets.
7. Today I’d like to discuss four key principles that - in line with G20 agreements - should underpin European financial reforms, they are:
- Greater competition.
- Non-discrimination.
- Improved transparency.
- And discretion to apply judgement, with stronger supervision.
Competition
8. So, looking first at competition.
9. The Single Market is one of the EUs great achievements. It has enabled firms such as UniCredit, Deutsche Bank, BNP Paribas and many others, to spread their operations throughout the European Union. Competition has created space for innovation and growth; and we all have an interest in ensuring that competition drives future innovation and future growth.
10. Significantly, the Markets in Financial Instruments Directive has fostered competition across financial services - which is no small achievement.
11. This has ensured that consumers have had access to the full range of financial products that exist; and has bought down costs for customers and corporations alike. But regulation needs to keep pace with market developments.
12. We must ensure that competition is promoted, not stifled. Regulation must not, therefore, raise barriers to market entry or promote individual agendas or vested interests.
13. The task now is to build on the success of MiFID, and address other barriers to market entry, particularly in areas of cross-border banking and insurance.
Non-discrimination
14. Secondly, we must preserve the openness of our Single Market.
15. If we put up barriers based on time-zone, location or currency, we will find ourselves locked out of the global trading community.
16. Fragmenting the EU will raise costs for market participants, which will ultimately be borne by consumers.
17. G20 Leaders have rightly made it clear that we need regulation of derivatives markets to be implemented in an internationally consistent and non-discriminatory way.
18. We welcome the European Commission’s commitment to this approach through their recent proposals on markets infrastructure.
Transparency
19. Transparency helps safeguard the interests of investors, instils confidence, supports market efficiency, and enables regulators to fulfil their duties.
20. In recent months, the EU has made strides towards increasing transparency: through its decision to publish individual CEBS stress-test results, and reforms to over-the-counter derivatives.
21. And with the fragmentation of equity trading, better post-trade transparency is critical. MiFID provide the opportunity to improve the quality, consistency and timeliness of post-trade information across European equity markets.
22. We believe that increased transparency should underpin future regulatory developments.
Judgement
23. Transparency is also essential to strengthening supervisors’ accountability, and allowing them to exercise judgement about the level of risk to firms and markets.
24. In the UK, we would like to see tough regulatory standards applied across the EU and the G20 - to secure financial stability and avoid the fragmentation of financial services.
25. Financial firms need to be treated with equal vigour everywhere and the UK will continue to support the implementation of a Single Rule book.
26. But as we look across Europe we see diversity in economic and market conditions; we need therefore to allow national supervisors to build on high common standards to deal with specific financial stability threats to their economies.
27. Supervisors should retain a degree of regulatory discretion, to impose even higher standards to suit the specific circumstances and macroeconomic conditions within their jurisdiction.
28. This will require a combination of high minimum standards, effective peer review mechanisms, and freedom for super equivalence.
29. We need reforms that allow regulators and supervisors to exercise judgement, and be accountable for their decisions.
Conclusion
30. We must learn the lessons from the financial crisis. We should use our reforms to strengthen and deepen the Single Market, not break it up or weaken it.
31. In implementing the G20, Europe and its partners must develop high global standards and ensure consistent implementation.
32. Within the EU, we must approach regulation in a way that protects and respects these four principles:
- Non-discrimination
- Greater competition
- Increased transparency
- And discretion to apply judgement, with stronger supervision.
33. I believe that if we follow these principles, we can reshape our financial service sector, promote innovation and drive growth across the EU.
34. Thank you.