View from City Road: EC rule could be Britain's loss

AFTER many months of wrangling the relevant ministers of the European Community countries have been able to agree a draft investment services directive. This should equalise regulation across the EC, but life is never that simple.

The UK regulators are getting twitchy because the directive will have the most fundamental effect upon financial services companies based in the UK. The City is Europe's leading financial centre but is under challenge from Paris, Frankfurt and Amsterdam and there are worries in London that some of our continental colleagues will use implementation of the directive to gain a competitive advantage.

Given the wrangling over the directive, which turned into a North v South battle with the UK leading one side and France the other, any jockeying for position now would be totally in character. The question is, what will the British regulators do?

As it stands the UK system of self-regulation has been under fire. Fimbra and Lautro are coming together to form the new Personal Investment Authority and Imro is feeling rather defensive over the Maxwell affair. In the long term the system should evolve into one self-regulatory body for markets and one for products but there is a danger that a more legalistic framework, akin to the US system, may be imposed.

If the self-regulators force compliance with the directive before the French do so it could be another case of Britain being put at a disadvantage in the EC because it played by the book.