Financial services companies are being inundated by the sheer volume of regulation and over a such a short period of time it could come at a major cost to the UK economy, says the CBI.
In a new report entitled ‘Promoting a Global Champion’ out today, the Confederation of British Insurers calls for a moratorium on new regulation, stressing ‘complacency’ in Brussels could threaten the global status of UK financial services.
The CBI points out between 2004 and 2006, over 20 EU measures are likely to be imposed on companies, causing a regulation and consultation overload.
While CBI deputy director-general John Cridland hails the UK financial services industry as one of the best in the world and a major contributor to UK employment, output and balance of payments, he stresses it is at risk.
He says: "A robust regulatory environment is essential. Internationally it's regarded as one of the strengths of UK financial services. But companies are being battered by the impact of relentless new regulation. It's forcing a dramatic and wasteful diversion of effort away from the daily battle to keep the UK ahead of its competitors."
The report suggests the rapid rate of new regulation is threatening an industry which employs over a million people and generates 5% of GDP.
The CBI suggests management time is diverted away from developing the business and serving customers, while CBI retail banking members say up to a third of all staff training last year was on new regulation.
Coupled with this, CBI retail banking members say they are spending 15% of their total IT budgets on compliance, says the report.
According to CBI, the way the industry is regulated in the UK is also discouraging global companies from relocating here.
The report says some EU regulations such as the Investment Services Directive and Consumer Credit Directive have been "gold-plated" in the UK, calling for the Government to match the recent FSA commitment on gold-plating.
Overlapping by DTI, FSA and Treasury on the Distance Marketing Directive and parallel investigations into credit cards by the European Commission, OFT and Treasury Select Committee reveals a lack of strategy, the report says.
In response to the report, the FSA says:
"We welcome the CBI's recognition that the UK regulatory environment performs well and that the FSA, as an integrated regulator, is beneficial to the UK's pre-eminence among international financial centres.”
The CBI report says while most of the FSA's current policy effort is driven by European policy initiatives, ‘our general approach is not to impose obligations beyond what is required by Directives’.IFAonline
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till