London is the world’s finance capital not only because of the huge assets it runs but because of its hundreds of years of experience, gold-standard regulation and “deep talent pool” which it has built up, MPs heard.
Asked to assess the outcome of European nations trying to take business currently conducted in the City by excluding Britain because it was no longer covered by Europe-wide regulation, financial services chiefs issued a stark warning.
“If the EU 27 wish to pursue a move to ‘repatriate’ then the result of the ensuing fragmentation would not help EU 27 corporates. It is an issue they need to think very, very carefully about,” said Gary Campkin, director of policy and strategy at lobby group TheCityUK which represent banks finance firms and the professional services sector.
“They need to think about future competitiveness, not just for them, but for us.”
Warning that such a move would be a “political decision”, he added that it would “be hard to see how regulation could be put in place which carves out London - the world doesn’t work that way”.
The outcome of such a move needs to be considered by both sides of the Brexit negotiating table, Mr Campkin said.
“The biggest risk of the wrong outcome is a situation where functionality goes not to Frankfurt, not to Dublin, but to New York or Singapore,” he said, referring to jobs and trade looking away from Europe. “It is the European economy that will lose as a whole”.
Chris Cummings, chief executive of the Investment Association, whose 200 members manage £5.7 trillion, echoed the concerns, saying that London’s strength was its “unrivalled deep talent pool”.
“The great danger is fragmentation, not only those capital pools but to talent and the expertise, especially in regulation, to peer into a market and understand what is going on,” he said.
Whatever impact the arrangement to leave the EU has on regulation of the financial services sector, Anthony Browne, chief executive of the British Bankers’ Association, said that the City needs a measured transition to the deal which is hammered out.
“We do not want a bonfire of regulation,” he said, saying "adherence to a higher global standard" of general rules is preferable, but that retain access to EU markets is vital.
“We are not opposed to deregulation in principle, but want global coherence to regulation,” Mr Browne said. “What is not in national interest is to to tear up regulation saying ‘Hah! We don’t like this’, and then find no one wants to trade with us because of that.
He added: “We need to sort out a market access arrangement then find the regulations we don’t need and don’t like and which don’t compromise us and then get rid of those.” [...]
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