They’re really, really, missing the point

A unified pricing mechanism. Integrated trading. Shared information, and standardised rules. The European Union this week pushed forward with plans for what it calls a “capital market union”. It is attempting to build a common rule book and a single market in money that will, in theory anyway, make it cheaper for companies to raise capital, and strengthen the continent’s key financial centres.

A threat to the City? That would be the knee-jerk reaction. In fact, it should be a gift to London. Why? Because, in the real world, the more Brussels harmonises its rule books the worse its performance gets. And because the common rules will undoubtedly be far more cumbersome than the national ones they replace. If London plays it right, it should emerge from this process in a much stronger position.

There is no questioning the ambitions of the commissioners in Brussels to create a single market in finance to serve the whole bloc.

On Thursday, it unveiled the latest round of proposals to bring national capital markets under a single umbrella. There will be a single tape for pricing, as in the US, shared rules on transparency and settlement, and common standards on disclosure.

The reason London – and New York – wins is because it is flexible.

You can have an idea during the Morning George, be selling it by lunchtime and counting the money by tea. The rules are that any such idea conform to certain general rules about fraud, ripping off and so on, something that we’ll sort out later after we’ve seen how it all does.

The EU version of regulation demands that everything be approved before it can be done. In a static world that might not be all that bad an idea. But our whole point here is that the financial centre which can innovate will win. It’s not even which rules the EU will install. It’s the very fact that there will be one set of detailed rules to govern all which will kill the project over time.

14 thoughts on “They’re really, really, missing the point”

  1. True, but it’s not actually familial. From the “We joined the Navy” “We went to sea” books. At one point Bodger (Badger?) meets a bloke whose career is curtailed because his ship went aground. In the afternoon, when !st Lt was conning. The embarrassment being that Capt was in the loo at the time. Leading to the comment “Always have your George in the morning”.

  2. I hadn’t recalled it from the John Winton books which I read as a youth but from a time I was with the Marines. With but not of. Once I was ’embarked troops’ in Intrepid and then I found that the RN has its own language.

  3. This was one of the stronger economic arguments for Leave – the Berlaymont hates the City (and financial markets in general) with a passion, and does everything possible to increase control over them (or ‘cut them down to size’). Had we still been members, we’d have been lumbered with this, or some daft Pigou tax on transactions, or …

  4. All of which is precisely why the Financial Catastrophe Authority is such an abject failure. Its risible rule book is one million plus paragraphs as it seeks to write a rule for every circumstance and to prevent any innovation. Well, the FCA was a de fcato EU agency..

  5. Bloke in North Dorset

    I hadn’t recalled it from the John Winton books which I read as a youth but from a time I was with the Marines. With but not of. Once I was ’embarked troops’ in Intrepid and then I found that the RN has its own language.

    I came back from the Falklands on Fearless and as a Sgt got assigned to the cook’s PO mess deck. Great bunch of guys but definitely in the separated by a common language category.

  6. BinD, in around 1974 we (me and a bunch of other squaddies and Commandos) invaded Orkney. Intrepid, RFAs, Ark Royal somewhere out of sight. Always reckoned they just took out the plans for that exercise and used it again in ’82. Anyhow, I have the dubious distinction of having been on top of the Old Man of Hoy without having to climb it. Didn’t get out of the Sioux though.

    This was a pretty successful thread hijack. Always take them in a direction they don’t mind going. Much like leading Brussels to making more regs.

  7. I have no idea why the EU insists on tying itself in knots with over regulation.
    But I’m glad it’s doing it.
    We just need to make sure we stop doing it.

  8. Bloke in North Dorset

    rk,

    I hiked up to the Old Man of Hoy when we were up there in our motorhome. Is there room to get out of a chopper parked on top of it? It’s a fairly impressive sight, though.

    Don’t worry about going OT, Tim’s view is that we’re like a bunch of people chatting in a pub

  9. Mr VA, the FCA is totally rule-bound. Ask them anything, they will refuse to answer, but refer you to the rule book. Notwithstanding the fact that you are asking them a question because the rules do not address your query. Grrr!!!

    They won’t approve anything in advance, so that they can escape responsibility when it goes tits up. Grrr!!!

  10. I’m not feeling too secure. There are politicians and bureaucrats in London right now thinking what a good idea the EU has here and wouldn’t it be sad for London to be left behind.

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