Member of FECIF board of directors
The Brussels’ Circle of Overregulation
Even though the European Union was given a series of warnings regarding its effort to regulate anything and everything, it did not slow down. Despite proclamations about “changing the course” and “smart regulation”, from November to December 2015 FECIF´s office in Brussels once again was buried under more than 1.000 pages of consultations, surveys and questionnaires from the Commission and the supervisory authorities. Yes, you read correctly: one thousand pages in just two months! For those who are now wondering about the origin of this infinite flood of paper let me tell you a story.
A long time ago, there was a kingdom called “Brusselium”. Although its council of elders ruled liberally in the first years, over time it became fond of imposing numerous edicts and rules that entangled lesser kingdoms and duchies. A large number of clerks and administrators found jobs in the Brusselium palace and did what they were hired to do: they wrote new rules imposed by the council. But the people of Brusselium were not foolish; they would not give up their freedom (and money) easily. A long time ago, they prescribed to the council and its servants that only acts with sufficient public support and necessity shall be presented to the kingdom’s senate. As the number of edicts increased and public support declined, the elders in the kingdom’s council thought about how to induce “public support”, when eventually there was none. So they invented the Brusselium Social Fund to artificially empower citizens to raise their voice by supporting them monetarily to do so.
Now, let us switch back from that unfortunate kingdom to the European Union. Why do many consultations start and what are the objectives behind them? Europe created an image of discussion with stakeholders and “participative” regulation, also called “co-regulation”. This is important, since in this environment no-one can complain that someone put a Spanish boot on their feet before giving them a chance to sign a confession. Critics often feel that extensive consultations are also used as a PR-instrument creating “problems” and generating public support for more regulation. Here is where activists and NGOs play a more and more significant role. In many cases they are (co-)funded by the EU institutions, just like the EIOPA, ESMA and EBA. Not surprisingly, the vast majority of NGOs with EU funding usually agree with their aims and support more regulation. Who would dare to doubt the word of consumers, citizens and voters? Remaining opposition melts away, swamped by the rapid tempo of consultations. The sheer amount of workload discourages many, particularly opponents with small resources, and pushes them out of the game. And those who remain in the ring face the constant danger of missing any new paragraph that slips in undetected.
Of course, you might well say that the above scenario looks like an exaggeration, which it is! But frustration among industry professionals about the way Brussels and its institutions overregulate the financial market is growing constantly. Especially with small and medium sized enterprises which form the backbone of Europe´s economy; they feel more and more helpless against the pro-regulation movement of the Commission and the EU-funded NGOs. SMEs simply lack the resources to keep pace. The winners are, once again, the big players who can afford to cope with the new regulation. Now it is time to remind Europe that its wealth and stability traditionally comes from SMEs, the sector most harmed by the Brussels’ circle of overregulation! If Europe does not quickly find its way back to a practical approach there will be no SME entrepreneurs left to benefit from the Single Market.
Member of FECIF board of directors
The article has also subsequently been posted at: http://www.internationalinvestment.net/regions/the-brussels-circle-of-over-regulation/