Writing for Citywire, Matt Connell says that recent clashes between the EU and the UK over financial regulation have ended in Europe coming out on top, causing some in the industry to fear for the retail distribution review.
European Court of Justice (ECJ) ruling on gender serves as a stark reminder that when it comes to financial regulation, the UK government is only one player in a cast of many governments and institutions across Europe. When there is a clash between European Union (EU) and UK regulation, the EU typically takes precedence.
People in the financial services industry will ask if the same thing could happen in other areas. Will the EU authorities dismiss the retail distribution review (RDR) in the same way they have discarded the use of gender in underwriting? The Financial Services Authority (FSA) looks confident about the status of its RDR proposals in EU law, but then the UK authorities seemed confident in their stance on gender a few years ago.
Some conduct of business regulations have been overturned in the past, but putting the brakes on RDR would be a step too far for the EU. One reason the FSA decided to abolish the menu card a decade ago was that the European Commission (EC) had decided it went beyond the standards set out in the Markets in Financial Instruments Directive (MiFID). Some commentators say certain aspects of the RDR go beyond MiFID principles and believe EU law could be used to scrap them.
The way policymakers in Brussels see it, people can argue about when improvements to financial services should be implemented but cannot stand in the way of progress. The FSA has done a thorough job of presenting the RDR as the face of progress and that is why the RDR express should continue full steam ahead.
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