LONDON (Reuters) - Switzerland accused the European Union on Monday of being protectionist and fragmenting global markets with new rules that are unfair to countries outside the bloc.
The clash highlights the difficulties faced by regulators seeking to make markets safer after the financial crisis without introducing conflicting rules for banks.
“Switzerland is concerned by protectionist tendencies in international financial markets. MiFID is an example,” Swiss state secretary for international financial matters, Michael Ambuehl, told the City Week conference in London.
MiFID is a draft EU law to make financial markets safer and imposes stringent obligations on companies from non-EU countries like Switzerland which want to do business in the bloc.
Markets should be kept open to keep EU industries fit and competitive but there was a risk of over-regulation, he said.
“It shouldn’t be the big players who set the rules and little players forced to comply. We need a level playing field for all countries,” Ambuehl said.
Nadia Calvino, a senior official at the EU’s executive European Commission which drafted MiFID, rejected accusations of over-regulating.
“We can’t say the financial crisis is something in the past and we can now focus on growth,” Calvino said.
Thomas Donohue, president of the U.S. Chamber of Commerce, said many countries, including the United States, were trying to impose “bad” regulatory ideas on other countries.
“U.S. derivatives regulation is raising alarm bells across the world, as it should,” Donohue said.
Regulation in general was becoming too prescriptive and requiring banks to find huge amounts of capital, he said.
“If we take away the right to fail and right to risk, we take away the right to succeed. We need to find the right balance. We have not quite found it yet,” Donohue said.
Distrust between regulators was also a sign of how there is still no convincing system for quickly dismantling a complex cross border bank in trouble, said Andrew Bailey, Deputy Governor of the Bank of England and Britain’s top banking regulator.
This distrust has led to some “balkanization” or fragmentation of markets as national regulators impose extra requirements on banks from other countries, Bailey added.
Derivatives held by banks were a problem when it came to winding down a big bank, as was imposing losses on bondholders.
“We have to get to a point where very clear rules of the game are understood by markets and the public,” Bailey said.
Regulators needed to get together well in advance so they all understand the procedure when things go wrong. “You can’t get to a weekend and make it up,” Bailey said.
Editing by David Cowell