Trade: Clifford Chance says complexity is pushing up businesses' costs by up to 60%

Red tape generated by double layers of regulation on both sides of the Atlantic is driving up costs and undermining transatlantic business, an influential group of financial associations claimed this week after commissioning research by Clifford Chance.


The group has called for a convergence of regulatory rules in transatlantic capital markets following a comparative analysis of regulations in place in the EU and the US, conducted by the magic circle law firm.


The Clifford Chance study found that regulatory conflict and duplication is reducing consumer choice and confusing financial services providers and consumers - as well as regulatory bodies themselves.


The report suggests priority should be given to formulating a common approach to 'know your customer' requirements, developing a common set of examination and registration requirements, and reaching a consensual regulatory approach to firms' outsourcing arrangements.


It also calls for a programme to simplify critical areas of regulation such as the obligation to deliver best execution, trade allocation procedures, and distribution of research.


The report noted that EU-US trade in goods and services was worth more than US$668 billion (£366 billion) in 2003, with 60% of US foreign direct investment coming from the EU, and 46% of US investment abroad directed towards the EU. It suggests that true integration of financial markets could lower trading costs by 60%.


The study was backed by the ABA (American Bankers Association) Securities Association; the Bankers Association for Finance and Trade; the British Bankers Association; the Futures Industry Association; the Futures and Options Association (FOA); and the Securities Industry Association. Clifford Chance conducted one-on-one interviews with executives from the institutions as part of its research.


Clifford Chance partner Tim Plews said: 'The analysis highlighted the level of complexity and duplication in the regulation of transatlantic financial services. This analysis has enabled industry associations to put together a study which argues for the need for positive action to ensure greater regulatory cohesion in the wholesale transatlantic financial services market.'


Anthony Belchambers, FOA chief executive officer, added: 'The case for positive action... is now overwhelming. If the critically important economic and commercial objectives of facilitating innovation, enhancing efficiency and liberalising consumer choice are to be achieved, then, as the market and trading environment has gone global, so must the way in which it is regulated.'