France’s top financial regulator is calling for more flexibility around how European countries implement market rules as Paris pushes to replace the UK as the predominant voice in EU decision-making after Brexit.
Robert Ophèle, chairman of the Financial Markets Regulator (AMF) said the imposition of Europe-wide rules left little room for national authorities to adapt to changing environments, such as the UK’s departure from the EU.
In EU lawmaking, the broad set of rules for the single market is set out by politicians in “Level 1” text. Officials and authorities then make the rules workable.
“As soon as you put something in Level 1, it’s very difficult to change anything,” said Mr Ophèle. “Even without Brexit, we should have [more flexibility]. But with Brexit, it’s obvious that we should.”
He cited comments from Andrew Bailey, head of the UK’s Financial Conduct Authority, in April that Britain favoured regulation with fewer “detailed rules that can become set in stone” after Brexit.
“When you listen to Andrew Bailey . . . I think it challenged the EU27,” said Mr Ophèle. “To some extent it’s clear and they are right, that being so rule-based . . . is something which is detrimental to the efficiency, the agility, the capability of the European regulation to give the appropriate answer to any challenge.”
Mr Ophèle suggested European authorities should be allowed to issue “no action letters”. These are widely used in the US to temporarily waive the application of rules in certain situations.
He was speaking soon after the release of a white paper that called for changes to EU investment rules and emphasised the profound challenges awaiting the UK’s finance industry after Brexit.
France is aware the UK will lose its pre-eminent voice in EU financial regulation, leaving an opportunity for others.
“I’m not sure that somebody will take the lead [after Brexit] but there will be a pack of leaders, obviously. And we will be one of them,” said Mr Ophèle.
“If the FCA was a leading force in the regulatory environment, it’s because London was . . . connected with the real market, and listening to them and understanding how it works,” he added.
One area where France is looking to exert pressure is Mifid II, where it has long led opposition to the strict unbundling of research from trading fees imposed by the new regime — putting it at odds with the FCA, a driving force behind the changes.
Last week the French markets regulator stepped up efforts to increase high quality coverage of small-cap stocks, which it fears has been affected by Mifid II. The rules imposed cleaner divisions between payments for trading and those for research. Historically, brokers had “bundled” research for free as part of their service.
The AMF has concerns that the emergence of research that is being sponsored by corporate issuers creates a potential conflict of interest. It commissioned a study to find “concrete ways” to improve the situation, which should be available by the end of the year.