Issue 6 - December 2011
Regulation vs. Competition - continued
The Balanced Scenario
Finally, it’s likely that regulators and legislators will continue their attempts to find that elusive middle path that balances stability with competition. As a result, industry stakeholders should expect that DG MARKT will continue to weigh competition arguments against financial stability concerns in issuing its legislative proposals.
This scenario is unsettling for financial firms, because legislators may decide their fates — insolvency or survival — case by case rather than “by the book.” This means that firms with a stake in such matters must influence the political debate in their favor. Winners will probably be those who act quickly, build a strong case for their position, and find allies who support their cause.
Victory to the Swift and Persuasive
In a balanced competition-stability world, financial market stakeholders should recognize the importance of early positioning. Stakeholders who engage constructively with regulators — not just stating problems, but offering creative solutions — can help shape their decisions.
To have the greatest success in favorably influencing the policy debate, stakeholders should:
- Establish a broad base of support among a diverse constituency, including other market players as well as nongovernmental organizations, the media, shareholder advocacy organizations and the general public
- Anticipate other stakeholders’ opposing arguments and plan to counteract them
- Enlist industry organizations to advance their viewpoint
- Most important, build a solid, fact-based economic foundation for any stability or competition viewpoint. Data should clearly show officials how taking the preferred position in the competition-stability debate will benefit the industry, consumers and the market in the long term.
Unintentionally, the ongoing political tension between competition advocates and pro-stability legislators has created a new field of competition among financial firms. It is no longer enough to serve customers, develop new products and operate efficiently. Now, to capture market share from weakened competitors or to simply survive until their fortunes rebound, financial organizations must help shape the debate.