The future of financial services: a new regulatory framework?


The regulation of financial services is no longer simply a matter of technical interest for one of the UK’s most important business sectors. It is now an inescapable element of the most important UK domestic policy debates.

That certainly includes the basic stability of the economy. As events in Ireland and Portugal are proving, the financial crisis did not end two years ago. Markets are still uncertain about the position of some banks and the willingness of governments to stand behind them. The contributions to this brochure take as read that banking will need further regulation, without quite settling what that should be.

It also includes the question of economic growth. The financial services sector is composed of major businesses in insurance and asset management as well as banks. Many are concerned that regulation intended to secure the stability of the banking sector will undermine the competitiveness of others. Ministers have made clear that a “rebalanced” economy means one with stronger sectors complementing thriving financial services, not one with a much diminished financial sector. This is also a question for European policy-makers as they set regulatory frameworks at the EU level.

Lastly, as Philip Middleton argues on page four, it includes the relationship between State and individual. The Coalition Government envisages a “Big Society” of smaller government and bigger individuals. But the recent trend is for governments to increase their role in financial markets. As John Fingleton argues on page five, an approach that places more faith in individuals’ decision-making should achieve greater innovation as well as stronger financial services markets.

Reform will publish research in the first half of 2011 drawing on this conference and further events on these issues.

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