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Regulation, Regulation… Regulation

Regulation, Regulation… Regulation

The publication of the SNP’s white paper on Scottish independence last week has given rise to a lot of discussion on its effects on every industry if the referendum on independence was to get a “yes” response. As the main debate has been around the economic effects of a sundering of the 300 year old union, a substantial section concerned issues impacted directly or indirectly on the financial services sector.

Two unconnected items leapt out at me from the 670-page tome. The first was the SNP’s proposal to replicate the regulatory environment for financial services giving us a Scottish version of the FCA to contend with along with the original version. The other was the statement that an independent Scotland would be an active participant in the British-Irish Council, the secretariat of which is already located in Edinburgh.

This set me off thinking about the new environment that will exist in this archipelago, if the independence referendum is won. The second biggest island, Ireland, is already split into two sections with two different regulators and two currencies. Now the biggest island, Great Britain, will also be split into two sections with two different regulators and possibly two currencies.

For an archipelago with a population of fewer than 70 million people, this seems a very complicated arrangement with a huge amount of unnecessary overlapping in the world of regulation. While there is nothing that can be done about the currency complication – the Scottish situation is unknown and the Irish are unlikely to give up the Euro after going through so much pain to stay within it – there does seem to be something we could do to simplify the regulatory environment instead of complicating it unnecessarily.

Regulation brings protection to the consumer but it also brings costs, costs which ultimately be borne by that same consumer, so it behoves us to ensure that the costs are proportionate to the benefit received and to make it as effective as possible.

On these islands, people move freely and will continue to do so in the event of the breaking up of the United Kingdom. Employees move between jobs in all the countries and all the big companies operate throughout the archipelago. We already have two regulatory environments operating and to add in a third will increase the opportunity for regulatory arbitrage to the detriment of consumers and will increase the regulatory overhead as each regulator brings in different rules to justify their own existence.

Surely it is time to consider making the British Isles a single regulatory area for financial services. In many policy areas, the Nordic and Benelux countries have managed to set up supra-national bodies without anyone feeling that it was a major diminution of their sovereignty. Perhaps it could be done under the auspices of a vamped up British-Irish-Scottish council leading to a single regulatory environment for financial services which would ensure that even if a single market is unobtainable in the wider EU as of yet, it could at least be achieved across the two islands perched on the periphery.

A bonus would be that a unified regulator representing three nations would also carry considerably more clout when it comes to influencing EU-wide financial regulations. Whether or not the referendum is passed, there would still be merit in a single financial market across the archipelago of nations that share a huge cultural heritage, a single language and have freedom of movement between the countries. Sharing decision making over this area would be of benefit to all consumers. National rivalry is best kept to the rugby field and the Eurovision song contest.

Tom Murray

Twitter: @TomMurrayDublin or @Exaxe

Google Plus: TomMurray

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