Fishburn Hedges

25.11.2010

Tower 42 was once the HQ of one of Britain’s big four banks.  But from January it’s the home (or one floor of it is) of one of three new EU financial supervisors, the European Banking Authority (EBA).

It comes at a busy time, with the world’s financial regulation being recast, and with the EU determined to lead the way.  Unlike the US and the rest of the G20, the EU, for better or worse, will be putting the Basel III international banking accord into legislation in the form of the Capital Requirements Directive IV, due to be finalised by 2012.

How the EBA will operate

The new EBA will be working alongside national supervisors, who will retain the lead role, in other words in Britain at present the FSA but in future the Bank of England (and the two are institutionally linked, with the Bank represented on the EBA board). But the EBA will be increasingly visible, monitoring consistency by national authorities in micro-prudential regulation, and driving a big agenda of developing ‘Binding Technical Standards’ as part of the CRD IV directive.  CRD IV, unlike its three predecessors, which had to be transposed into national law, will be directly applicable in member states (and Norway, Iceland and Liechtenstein).  That means no gold-plating, and many fewer national exemptions – a much tougher world for all the EU’s banks.

The UK government secured the EBA for London, as the French government secured its sister securities markets agency ESMA for Paris, after a classic Euro bust-up this summer (they were originally all going to Frankfurt). A “victory for Britain” perhaps, though of course this may not stop Eurosceptics howling at a European regulator in London once they notice.

Apart from that, what does this mean for communications and public affairs?

Impact on communications and public affairs

A senior EBA official was on the speaker circuit this week, fitting a pattern of regulators and supervisors, both EU and UK, getting out and about much more than they have in the past.  For the financial media, regulators are now sexy.  And as an arm of democratically elected governments, they should arguably be more popular with the public than the dreaded bankers.  The trouble is, even if they’re saying things the bankers really don’t like, to the uninitiated they inevitably still sound like bankers. This means that the fora and media where they can be deployed effectively still need to be fairly specialist. I can’t see the EBA doing that well against Paxman on Newsnight.  That ongoing education job should be left to Gillian Tett.

On the public affairs front, global financial services players (the ‘sifis’ – systemically important financial institutions), and trade associations are peddling hard to keep up with the volume and range of financial re-regulation.  But for smaller financial services companies, the increased visibility of the new Euro authorities – EBA, ESMA (securities) and EIOPA (investment and pensions) will make the playing field feel more complex than ever.  While national supervisory authorities remain central, the EBA’s direct Binding Technical Standards for example, will encourage financial institutions to keep trying to understand exactly when and where they need to make their case.

What it means for London

Location will matter a bit in all this. For London players, CESR (ESMA’s predecessor) has always been seen as “Brussels”, even though it was based in Paris.  The European Medicines Agency, which has been in Canary Wharf for some time, is the main Euro agency we’ve had in the UK, but it’s not really impinged on people’s consciousness.  A more prominent and inevitably controversial EU agency in London like the EBA will feel a bit different: the interaction between the Bank of England with its new prudential role and the new EBA will be played out here in public, and it will be fascinating to watch.

Posted by Andrew Marshall