More or less regulation?

Addressing the FinanceMalta “Emerging stronger together” conference on Wednesday morning, Dr Mario Vella, Special Commissioner for Economic, Trade and Financial Relations with the United Kingdom, participated in a panel discussion titled, More or less regulation? London’s orientation and the consequences for Malta.

Dr Vella was accompanied by Graham Bishop, Commentator on EU Financial Regulation: driven by politics and economics, UK, Kenneth Farrugia, Chairperson, Malta Asset Servicing Association and Elizabeth Carbonaro, Chairperson, Malta Insurance Management Association.

Dr Vella explained the global financial crisis of 2007–2008, the ensuing recession and then the European sovereign debt crisis made stricter regulation inevitable. The resulting more stringent regulatory frameworks, plus an all-time low level of interest rates and the unprecedented COVID-19 shock, are all weighing on banks’ bottom line. Regulatory reporting and scrutiny have also intensified further during the pandemic year. Of course, this has had its downside, such as the risk of over-regulation and competition for the banks from non-bank financial institutions.

He emphasised it is hard to generalise about the impact on London or Malta: it depends on the particularities of the financial services sectors in question. But, thus far, the fact that Malta and the UK have a shared history of EU membership – which, in the case of the UK, came to an end last year – means that, by and large, the UK and Malta have implemented new legislation which has generally been quite similar.

He added, “Following Brexit, the question has changed: now, we need to look at the sorts of differences that will emerge between London’s regulatory framework and our own, as a result of UK divergence. Within this context, coordination is more than ever needed between regulatory bodies as well as the intermediaries, nationally and at the EU level. Although the UK is out of the EU, it remains a key player in determining the general thrust of global regulation, and we should not forget this as we seek to update our own legislation.

From Rishi Sunak’s speech at Mansion House last month, however, the Treasury seems to have abandoned the prospect of an equivalence deal with the EU, and the Chancellor has indicated that it will realign its regulatory infrastructure to focus on other partners, such as the US and China”.

Yesterday, the FT reported that Lord David Frost today would be briefing the UK Parliament on the UK’s new strategy towards the Northern Irish Protocol. It is likely that he will propose the elimination of checks on goods moving from the UK to Northern Ireland which are not intended to be exported to the EU, whereas checks in terms of the Protocol would be carried out on goods intended for EU export.

Dr Vella concluded, “This proposal is likely to anger Brussels and further sour the EU-UK relationship. We should bear in mind that EU Financial Services Commissioner Mairead McGuinness has, only recently, implicitly tied deeper financial services cooperation and the possibility of equivalence to UK cooperativeness with respect to Northern Ireland and the EU’s trust in the UK’s good faith in these negotiations.”