The Mayor’s report on the competitiveness of London as a financial centre is out today. Among the threats it lists is this: “London’s reputation could be tarnished due to its close association with the financial services industry”.
That’s a bit awkward. And how do you reconcile it with the report’s other view, that London’s role as the world’s financial centre is threatened by new regulation?
Perhaps there’s too much hysteria about this, especially as some of the proposed legislation comes from Brussels, triggering a false note from the Telegraph in the form of its “Ditch the Directive” campaign.
Brussels draft Alternative Investment Fund Managers Directive outlines a tough regulatory environment for our hedge funds and private equity firms. It is still in negotiation, with many areas causing difficulty, including depositary requirements, leverage caps and third country access. It will also not be free; Charles River Associates, a consultancy hired by the FSA, estimated that EU pension funds will lose returns of EUR 1.4bn a year under it.
But the directive is a start to vital international cooperation in avoiding a repetition of the crisis. It aims to create stable, long-term capital markets to benefit the real economy, and transform financial services into a regulated, open and fairer industry. All good for London's reputation.
Even the Directive’s natural enemies don’t want it abandoned completely. Instead of ditching it, London mayor Boris Johnson this week told the London Assembly: “I will be working with the City to press for substantial amendments to the text of the Directive as it is negotiated."
Meanwhile, the Financial Services Authority is also working to amend, rather than abandon, the Directive. “My view is that arguing for the status quo would be misguided and futile,” said Dan Waters, the FSA’s sector leader for asset management."We continue to feel there is much in the AIFMD that we can support.”
It is a shame that some euro-sceptics want to hijack the debate rather than helping it along. There are claims the Directive is a spiteful attempt to kill our best industry while leaving French wine and German cars well protected. This is just wrong (after all, it’s not the economy that French wine brings to its knees) and a distraction from the real job of making the Directive work for everyone’s benefit.