IRSG response to House of Lords inquiry on EU financial regulatory framework

Published 9 Jan 2015

In July 2014, the House of Lords EU Sub-Committe on Economic and Financial Affairs launched an inquiry into the EU financial regulatory framework, with a view to assessing whether it is succiently robust to prevent future financial crises. 

In its written evidence to the Committee inquiry, the IRSG set out its support for the EU’s efforts to improve the regulatory framework for financial services and to implement the G20 Pittsburgh agenda. This was necessary to remedy the serious failures in the existing regulatory framework that were exposed during the financial crisis. However, the IRSG raised some concerns, including:

• International regulatory coherence is a major concern for the financial services industry. In the EU, the treatment of third countries in EU legislation has often proved problematic for cross-border business and could have adversely impacted trade and investment to and from the EU.
• Another key concern regards the process for introducing EU regulations. In the past 5 years, we have seen the Commission prioritize regulations that did not tackle the root causes of the crisis (such as the short-selling and Credit Default Swap (CDS) regulation) where we believe more emphasis should have been on tackling areas which would have a substantive impact on financial stability (for instance the Bank Recovery and Resolution Directive). The quality of impact assessments and the interplay between Level 1 and Level 2 could also be improved.
• In terms of future priorities, implementing and enforcing the huge amount of new legislation should be the primary objective for the next 5 years. Priority should also be given to jobs and growth, in particular advancing the long-term finance agenda. Finally, completing the reform agenda, in particular proposals on recovery and resolution for financial market infrastructure, should also be prioritized.