Legislators need to think about the impact on the real economy when they impose financial regulation.
This was the warning sounded by the European Association of Corporate Treasurers (EACT) this month in two responses to consultation papers issued by the European Commission.
In its response to the Commission's consultation on the long-term financing of the European economy, the EACT criticised legislative acts that contradicted policy goals. An example, it said, was the proposed financial transaction tax, which 11 eurozone countries intend to apply from the middle of 2014.
“A financial transaction tax … would increase the cost of long-term finance as investors demand an increased yield to compensate for the tax,” said the EACT. “It would also run the risk of reducing foreign investments in the EU as global investors have the choice of investing their resources anywhere in the world in order to generate a return.”
The EACT also called on legislators to “assess the impact of any financial services legislative proposal on non-financial companies” and ensure there is a good balance between creating a stable banking system and encouraging lending to the economy.
Responding separately to the Commission’s consultation on reforming the structure of the EU banking sector, the EACT called for the postponement of legislative action to separate retail and investment activities.
It said that much of the recent financial services regulation, including Capital Requirements Directive IV and the European Market Infrastructure Regulation, had already affected non-financial companies in terms of the cost of, and access to, funding. It added: “Any further measures seeking to reshape the banking structure in Europe would not be welcome at this stage and should be reconsidered at a later stage.”
The EACT is a grouping of national associations representing treasury and finance professionals in 18 countries within the European Union. It has about 12,000 members representing some 6,500 groups and companies.
Sally Percy is editor of The Treasurer