Conservative MEPs will make cutting the potential PI burden on IFAs imposed by two European Union directives one of their next major campaigns, according to MEP Theresa Villiers.
In the run-up to next month's European Parliament elections, Villiers believes there has never been a more important time for the financial services sector to focus on Europe.
She estimates that around two-thirds of the rules coming from Brussels at the moment have a direct impact on the financial services market.
Although she believes a great deal of progress has been made in raising the profile of UK concerns in the European Parliament, she concedes there is still a long way to go to “make our voice heard”.
She says: “The need to elect effective MEPs will be vital for the financial services industry and the City.”
Villiers is keen to look at ways to reduce the pressure on SMEs struggling to absorb costs of increasing European regulation.
“We have had a whole string of directives that have a direct impact on financial services, on jobs and the rest of the sector. The parliament has increasing power to debate these crucial issues.”
Villiers is concerned that there is not nearly enough activity in reviewing existing regulation and is unhappy that old regulation is rarely got rid of but is normally replaced with a new set of rules. She believes it is very important to clamp down on duplicating regulation or “gold-plating”.
The Conservatives are looking at how a system could be established that would allow people to pursue action through the UK courts if they feel their business has been subject to excessive regulation.
Villiers says: “Regulation does have a huge cost impact. I would like to see an independent assessor brought in similar to the system used in the Netherlands.”
She would like an independent body to be established to look at new proposals and monitor the impact these rules have on the day-to-day running of businesses.
Villiers says one of the Tories' key campaign areas will be reducing the duplication of rules and believes it will be crucial to limit the requirements in areas such as professional indemnity insurance. She says: “One of the key areas will be securing depletion of PI capital requirements for businesses like IFAs.”
She admits that there are still significant issues posed by the double whammy of the insurance mediation directive combined with the markets in financial instruments directive, also known as ISD2. She wants to see the FSA more actively involved in dealing with the shortage of PI cover as well as lobbying MEPs.
Villiers is probably best known for her role as rapporteur – a person appointed to carry out an investigation – on one of the most controversial pieces of legislation to come from the European Commission in the last three years – the investment services directive.
There is still a sense of exasperation when she discusses the fight she had on her hands to change the format of the directive from its original shape but she believes the danger to execution-only business has been averted.
She says: “The ISD was fought all the way and lobbying was going on at each stage but there is only a limited amount you can do in parliament if the wording has already been messed up in the council.”
Implementation of the Financial Services Action Plan has renewed debate on the introduction of a more centralised monitoring of cross-border activity and regulation in member states. Villiers is in favour of more effort to ensure legislation is consistently enforced and believes it is vital to ensure rules are applied consistently in each member state.
But she concludes that the idea of a super-regulator is logistically impossible and is firmly against it. She says financial regulation runs so close to criminal law in each state that it would be impossible to bring these laws together into one all-encompassing system.
Villiers says: “I do not think any member state wants to see their own criminal justice system interfered with. I do not think there could ever be a point where this would be practical. I do not think it would be surprising if in future some of these laws moved closer together.”