Editorial: Six of one, half a dozen of the other

Author: | Published: 8 Aug 2019
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Arguably the most enduring images of the financial crisis of 2008-9 – aside from, perhaps, Lehman staff wielding cardboard boxes of personal effects, paperweights and untold other paraphernalia of the job they had until about an hour earlier – are those of the long lines of regular people queuing outside high street branches of British bank Northern Rock.

It's clear that the financial system of the past failed those people, and that things had to change. Thus the following 10 years were spent improving that system, with the aim of making sure the mistakes of the past could not be made again.

That's all well and good. But it occasionally misses the point that, as damaging as it can be when things go wrong, financial services is important to the real economy. Regular people need to be able to invest their money, to access returns on growth and innovation. In some areas, the response to the crisis has swung the pendulum too far in the other direction: capital requirements, designed to limit the damage of another Northern Rockesque bank run, have forced banks to shore up capital they may have previously lent to small businesses, for instance.

Or the EU's Packaged retail and insurance-based investment products, or Priips regulation. Aimed at making investment products easier to understand and compare, the actual effect so far has been a significant reduction in the range of investment products available to non-professionals, as confusion over calculations and risk factors is rife. In the first quarter of 2018, that drop may have been (the data is imperfect) as high as 60%. That is, of course, an unintended consequence. Regulators tried to fix one thing and overlooked another in the process. These things happen.

Policymakers increasingly recognise the importance of this balancing act, and one such remedy has been the EU's Capital Markets Union (CMU). The CMU's main purpose is twofold: one, fostering better integration of the EU's financial markets; two, improving retail investor and small and medium-sized enterprise participation in those financial markets.

In this month's cover story, EMEA reporter Jimmie Franklin sits down with the European Commission's head of the CMU unit, Tatyana Panova. Retail investors are clearly on her mind: as Panova says, if the financial crisis taught us anything, it's that investor confidence must be ensured at all times.

Her choice of language is interesting. Investor confidence is a different thing from investor protection. This may represent a slow but sure shift in attitudes towards sensible, right-sized regulation that stimulates growth and creates capital markets for everybody. Here's to hoping.

Enjoy the issue,

Lizzie Meager
Managing editor