Parkinson –the original market reformer!

A guest blog entry by Michael F Newman

I was a guest at the Financial Services Club meeting on Monday 7^th November to hear Lord Parkinson speak on the future of the City in the European markets. He made a broad ranging observation on the developments of the London markets going back to his time as secretary of State in the reforming Thatcher government.

Key points of his talk and subsequent questions focussed on the issue of regulation of both the London and pan-European Markets. Parkinson was clearly not a fan of over bloated all-powerful regulators like the SEC whom he felt had not delivered the incisive regulation that their size, power and cost had seemed to warrant. There have been scandals and there have been well-published cases of major miscreants more likely to be caught by accident or whistle blowing than by diligence of the regulator. He felt too that the FSA had become too large and bureacratic to be as effective as it might be if it were segregated into powerful units more aligned with the businesses they are supervising.

His first hand experience of government both in the UK and Europe was that civil servants are at heart bureaucrats that are culturally not set up to make decisions or struggle with such concepts as light regulation involving a sort of guiding hand at the tiller. He explained the limitations of a House of Commons finance sub committee as being the reporting line for the FSA. It is peopled by those who are trying to move up the political ladder without creating controversy and are ever mindful of the need to garnish votes for their party. Big Banks, brokerage houses and businesses do not have votes. He felt that best progress was made when you did what you thought was right without excessive consultation and committee based discussion.

He made a very valid observation about the risks the markets ran if they ripped of the increasing numbers of emerging capitalists i.e. those with or about to inherit tens of thousands of pounds, which they would want to invest. The Capitalist model is about the only show in town in Europe now that the old socialist and soviet systems have broken down and got discredited. Where would it lead if capitalism got too greedy and scandalous to continue to retain the support of its voting citizens?

He frequently returned to the challenge of the European ideals and the difficulty of delivering anything practical especially now that the EU has expanded to some 26-member states. He felt that the UK should just resist and say no if it felt that the EU route was not sensible or was actually threatening to our Financial Services Industry. He cited the Maastrict op out by John Major as a case in point. He also had confidence that Brown was certainly up to the job of doing this if he was so minded.

Many in the audience are either involved in or aware of the forthcoming MiFID directive for more jealous pan-European harmonisation, which does not yet seem to have tackled the practical implications and potentially very high cost consequences.

In my own view Parkinson and Goodison did not get the proper credit for helping the UK markets reforms proceed as effectively as they did in the eighties. Their mutual settlement of the threatening restrictive practices court case enabled London to make rapid progress in reform and achieve a major step forward in establishing London’s pre-eminent European Financial Services position.

Lord Parkinson comes over as a sound balanced presenter with solid grounding in the practicalities of reform and getting things done. In some ways it is a pity he is not still actively involved in helping the UK and pan-European Financial markets reform programmes.