Speaking at the Financial Services Authority AGM on Thursday, Chairman Callum McCarthy repeated concerns that the growing number of initiatives, including Sarbanes-Oxley, Basel II and the new Directives introduced under the Financial Services Action Plan, now represent a “significant hazard” for the industry.
The cumulative cost and strain on management teams as a result of the combined host of new initiatives is a serious problem, and one that is often not balanced by those new initiatives meeting two tests – that of market failure and a positive cost:benefit analysis, said McCarthy.
He highlighted the Market in Financial Instruments Directive (MiFID), which will allow investment firms, banks and exchanges to provide their services across borders on the basis of their home country authorisation, and will change the conduct of business rules applicable to financial institutions.
Consulting group Celent puts the total technology spend associated with MiFid at €1 billion among capital markets participants. Celent expects total IT spending at European banks to exceed over €45.7 billion in 2005.
McCarthy continued: “It is deeply unsatisfactory that UK financial services firms face major changes, with the associated costs, for an initiative which has been subject to no comprehensive EU cost-benefit analysis to assess the specific contribution it might make to unlocking the prize of a more integrated European capital market."
He added: “That kind of approach to policy-making cannot be sensible."
The FSA would, he said, try hard to support Internal Markets Commissioner Charlie McCreevy in making “rigorous impact assessment a vital determinant of EU legislation.”
