FN: LSE chief warns over risks of new regulatory focus

28 June 2011

The chief executive of the London Stock Exchange today warned new UK regulatory body, the Financial Conduct Authority, that any plan to regulate both wholesale and retail markets under one mantra could drive wholesale business overseas.

Speaking at the FCA's launch conference in London, Xavier Rolet said: “There seems to be a consensus of applying a consumer-protection filter to everything across financial services. Success for the FCA will be if it nurtures and protects retail trading but also protects wholesale market activities”.

Rolet said the latter will be vital if the UK wants to maintain the status of London, home of two-thirds of European wholesale business, as a dominant financial centre. He added: “Let’s make no mistake: the wholesale market will not exist under a consumer-protection regulatory focus. If we do that, wholesale business will leave these shores. We need to be cognisant that the wholesale market works differently”.

Also speaking at the panel discussion on what should constitute success for the FCA was Hans Hoogervoorst, a former Dutch politician who is now executive chairman of the Netherlands Authority for the Financial Markets, the Dutch markets regulator. He said he supported the so-called 'twin peaks' regulatory set-up being implemented in the UK, but added that regulators need to have a clear mission. “One of the main under-focused problems is the multitude of conflicts in the investment banking industry, which have largely not been addressed. Politicians have been unwilling to tackle this as investment banks make a lot of money, but I say go and get them. The magnitude of misbehaviour over the last few years has been shocking”.

Hector Sants, chief executive of the FSA, told delegates at the conference he hoped the event would prove “a landmark day in the restoration of trust in financial services”. He also called on those present from the financial sector to play their part in helping define the FCA’s role and how it will approach its duties: “I want us to use the coming period to reach a collective view. It is not the regulator’s role to determine its own mandate. That is for society as a whole to agree. I encourage us all to debate things carefully”.

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