13 June 2014

Barnier: The EU and US - Leading partners in financial reform

The global nature of the crisis called for a global response. We rose to the challenge with the G20 in the driving seat of global financial reform. After years of lax regulation, we have fundamentally changed the way in which we regulate finance. Both the EU and the US have equally delivered on these reforms.

In Europe, we created an entirely new set of rules governing the financial sector. We implemented the G20 so that every market, every player and every activity would be well regulated and effectively supervised. We have implemented the agreed international standards while respecting the EU's legal and regulatory system and traditions - just as the US have made changes in line with the specific features of their system.

The EU reforms have been delivered through a large number of individual pieces of legislation. While the US delivered one large framework bill in the Dodd-Frank Act. But we are now both at a very similar level in our implementation.

Why we need to include financial services regulation in TTIP

Joined-up markets need joined-up regulation and supervision. The EU and the US agree on the overall objectives of sound and resilient banks and financial markets, but we have and will keep different regulatory procedures and frameworks. We need to do more to make these regulatory systems work together and identify differences and eliminate them where possible, or at least mitigate any detrimental consequences they may have.

It would be nothing short of a disaster if our agreements on broad principles are undermined by the detailed rules and their implementation being just too different. This is why we want to include regulatory cooperation on financial services in the TTIP: Not as I often read to delay reform, but because it is regulatory issues that are at the heart of our relationship in financial services. Our relationship is about much more than market access.

I understand there are concerns here that including financial services regulation would lead to the unravelling of the Dodd Frank Act and deregulation of financial services. For us, the objective is the opposite: better and high ability interoperable regulation.  Cooperating on regulation is the only way to ensure global financial stability while maintaining open markets. For this, we need a solid, treaty-based system for regulatory cooperation, one that harnesses the political push that the TTIP brings, while leaving the work on regulation to the regulators themselves.

US negotiators in the TTIP argue that we already have an informal dialogue, the Financial Markets Regulatory Dialogue, and that it is enough. I don't agree. Informal dialogues between administrations are useful and we fully intend to continue and upgrade them. But a dialogue is not true regulatory cooperation.

The dialogue has not avoided situations – which in my view could have been avoided – where we only managed to find last minute fixes in situations of urgency leading to important market insecurity. A good example is the process which led to the “common path forward” on OTC derivatives. We ended up discussing important developments in an ad-hoc way, in informal and opaque settings. And now we are struggling to implement the agreements reached late in the night. The same goes for many other issues in securities, banking and insurance regulation.

We will of course never agree on everything and neither jurisdiction should be able to force the other to follow its rules. But we can try harder and we could do better to avoid the problems I mentioned.

Full speech

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