On June 25, New Europe hosted its second panel discussion on the future of financial regulation. The discussion was introduced by two keynote speakers: Paulina Dejmek-Hack, member of cabinet and economic adviser to the President of the European Commission Jean-Claude Juncker, and Eva Kaili, Member of the European Parliament in the Progressive Alliance of Social Democrats.
Dejmek-Hack outlined ten points the Commission is bearing in mind when it comes to financial regulation. Having recently rolled out its mammoth MiFID II legislation, it was not surprising to discover that the EU’s approach to such complex matters is highly methodical.
Marking the ten-year anniversary of the financial crash of 2008, she noted that while regulation had come a long way since then, it was necessary to be aware that some of the rules applied in the wake of the crash were coming of age, and that as such it is just as important to review existing legislation as it is craft new rules for current problems.
As well as being a member of the Economic and Monetary Policy Committee (ECON), Eva Kaili is the Chair of the Science and Technology Options Assessment, Scientific Foresight Unit (STOA). In this capacity, she spoke of her experience discussing and preparing the legislative framework for the deployment of blockchain technology. Enabling data to be stored on a decentralised ledger, she described how blockchain could make efficient self-regulation a reality in the near future.
In the meantime, however, the panellists – moderated by Aleksandra Palinska, Senior Policy Adviser at EuropeanIssuers – agreed that the current state of regulation, while on the right track, certainly left room for improvement. These included Catherine McBride of the Institute for Economic Affairs, Daniel Schlaepfer, the founder and CEO of Select Vantage, a day-trading firm operating across 75 countries, Aleksandra Maczynska from Better Finance, an advocacy group, and from the regulators’ perspective, Jean Paul Servais, Chair of the Belgium Financial Services and Markets Authority and the Chairman of the Financial Innovation Standing Committee of ESMA, and Jeffrey Franks, the Director of the IMF Europe Office.
Speaking of the trajectory of European legislation, Daniel Schlaepfer gave a perspective from the market participant side. He said that in his view “the intention is good, the direction is good. But I think there has to be more monitoring of the progress. More tweaking, adjusting, seeing the results.”
He discussed ways in which communication between regulators and market participants could be increased, describing the development of the ‘sandbox’ idea: “I’ve participated at events in Toronto – where the exchange and the regulators put on a roundtable to discuss topics because the trends were moving too fast for regulators to make a decision. So they brought everyone together to have a discussion.”
Other ways in which regulation could be more adaptive were also discussed, such as whether regulation should be more nimble, and be applied in a more tailored manner to different financial environments. Also raised was a problem that is often overlooked in the debate on regulation – the fact that it is getting increasingly expensive. Indeed, Schlaepfer noted that the increasing costs of compliance is even acting as a barrier to market entry for small to medium-sized firms.
It was largely agreed that regulation is a balancing act between managing risk and encouraging competition and that increasing communication between regulators and market participants is certainly, therefore, a priority. It was additionally noted that while “more regulation” is not the answer that the financial industry currently needs, market participants still have work to do to regain consumer trust.