The BBA is now integrated into UK Finance. Please go to www.ukfinance.org.uk for new content and updates from UK Finance.
Material published by BBA prior to 1st July 2017 is still available on this website.
From 1 July 2017, the finance and banking industry operating in the UK will be represented by a new trade association, UK Finance. It will represent around 300 firms in the UK providing credit, banking, markets and payment-related services. The new organisation will take on most of the activities previously carried out by the Asset Based Finance Association, the British Bankers’ Association, the Council of Mortgage Lenders, Financial Fraud Action UK, Payments UK and the UK Cards Association.x
Why do different countries have different plugs? They all have the same objective and function but have slightly different designs. Three pin in the UK, two round pins in continental Europe and two different pins in the Americas and Asia. Frustrating for travellers who must remember to pack adaptors (or buy them at great expense at airports), and costly for manufacturers who must bear the cost for designing and building different versions of the same product for different markets.
Even if we could have a global convention on plug design, the short-term cost of change would probably outweigh the long run gain. Wouldn’t it be better if next time we invented something, like electricity, there is a process to ensure that designers in different countries talk to one another and coordinate their plans? Better for the end users of plugs, manufacturers of products and regulators of consumer safety (bad for the retailers of expensive airport adaptors).
In the financial world, plugs are a good analogy for post-crisis regulation, particularly transatlantic. Many important changes have been implemented to make markets safer and sounder. Legislators and regulators in the EU and US have broadly agreed what should be done. However, the outcome has been small differences which impose costs on the users of financial services and compliance burdens on banks. Lawyers (the sellers of airport adaptors in our analogy) have done well.
There is, however, an opportunity to prevent this happening again. Next week sees the ninth round of negotiations between the EU and the US over the Transatlantic Trade and Investment Partnership, or TTIP. The EU has proposed that TTIP should be used to put in place a framework under which the designers of financial regulation on either side of the Atlantic get together to discuss objectives for regulation and to coordinate their approaches to implementation. The hope is that by doing so unnecessary design differences – in areas like margin rules – can be avoid to ensure that markets remain more open to the benefit of clients.
Whilst supported in the EU, this idea has been more difficult to accept for the US authorities. There are various arguments cited as to why it would be wrong to include financial services regulatory cooperation in TTIP. It would be used to try and unpick the US Dodd Frank Act. Wrong: the proposal is for a forward-looking framework. It would see the detail of derivative regulation traded off against access for agricultural standards. Wrong again: the idea is for TTIP to set a framework in which regulators can work, not that trade negotiators argue over the detail of financial regulation.
It would undermine the independence of US regulators. That’s not the intention either. The regulators would rightly remain responsible for their own rules, but would benefit from a more formal process to avoid unnecessary differences. It would undermine the G20. Whilst the G20 is a vital forum for discussing global regulatory objectives, the EU and US markets are the deepest and most connected in the world and so would benefit from greater bilateral dialogue.
All in all there is a very strong case to include financial services in TTIP. Negotiations will take time and may stretch into next year. During this time it will be important for the industry and clients to continue to make the case for greater coordination and cooperation. Enhancing coordination at the start is better than trying to work with different plugs at the end.
The BBA, along with SIFMA and a number of other trade associations and representative bodies based in the EU and the US, have signed a joint letter on the ninth round of TTIP negotiations. Click here to read the letter.