December saw the final stage in the passage of the Financial Services Bill through the HOL. The behaviour of certain people in the City of London has clearly been unacceptable but there is no doubt that a buoyant financial services sector contributes greatly to the country’s general prosperity. There is a real danger that the new regulatory bodies will want to “have a go” at firms to show that they are acting tough – one regulator has said publicly that he intends to shoot first and ask questions afterwards.
Proper regulation of financial services is essential but we need an environment that encourages innovation, does not discriminate against smaller firms and avoids a “one size fits all” approach.
I have been trying to persuade the Government that the principles that a regulator should follow (as defined in the Bill) should not just be “proportionate” but also should be “fair and reasonable”. Despite two or three attempts my words have fallen on deaf ears at the Treasury and the Bill remains unamended. I remain nervous about the long term effect for the UK in general and financial services in particular.