A failure to assess the cumulative effects of European regulation is leading to excessive burdens on the financial services industry and could damage investors and growth, according to Conservative MEP Vicky Ford.
Speaking to Money Marketing in Brussels, MEP for the East of England Ford says impact assessments are done for individual pieces of regulation but not on the “patchwork” of regulation as a whole.
She says: “What you tend to see is that regulators will look at the impact of this bit of legislation and the impact of that bit but nobody puts them together in a quantitative way to judge the cumulating effects.
“Through Basel and Solvency II we have taken streams of capital out of large firms and if, on the market side, you add further burdens then it gets even more difficult for those firms to invest and grow.”
Ford admits that “secondary impacts” of regulation may make a cumulative impact assessment difficult.
She says: “For example, if we said banks can start using covered bonds toward capital requirements, that would push up demand for them beyond what the market would ordinarily sustain and push up house prices, so secondary effects like that are hard to judge but I still think it needs to be looked at.”