The limited benefits of regulation

I am in possession of the latest monthly update from one of the (expensive) compliance analysis bodies that we subscribe to, in what sometimes feels like a vain effort to comprehend the practical impacts of our beloved regulators' machinations.  And, no, I have not misplaced that strategic apostrophe - I mean regulators, plural, as any attempt to second-guess the future direction of UK financial services regulation has to take into account the apparently limitless appetite for bureaucracy of that 'greater house', namely Brussels.

IFAs find themselves in the unwholesome position of clinging for dear life to the undergarments of one Sumo wrestler (the FSA) as it struggles with another, weightier Sumo wrestler, the European Commission.  Perhaps that is simply too-graphic an analogy for most sensitive intermediaries - I somewhat regret thinking of it, but once it has popped into one's mind...

This latest compliance bulletin consists of thirty-six pages of the finest exposition of the wonderfully erudite "UK Implementation of the Payment Services Directive".  The PSD began its life as a draft EEC Directive in December 2005, was adopted formally in November 2007 and has a deadline for implementation amongst long-suffering EU Member States by 1st November this year.

On a positive note, it is clear upon reading the offending document, that it is unlikely to apply to UK intermediaries, so we can heave a welcome sigh of relief that this is not going to be yet another EU import which gets foisted onto a market which really should not be subject to it.  What is fascinating is the degree of ambiguity inherent in these new regs.  Four years in the making, and voluminous in its sections, subsections and paragraphs, and yet there are still grey areas where interpretation is required. 

On reflection, it seemed to me that this is consistently typical of the deceits implicit in regulatory bureaucracy.  After all, regulation purports to achieve something.  One wonders, given its obvious failures in relation to the banks and big financial institutions, and given the layers of opacity inherent in each Directive, what that something actually is?  Analysing the trends over the last few years, one has a sense that one is observing a kind of post-modernist revision of marxist-leninism, where the regulators genuinely believe that they can actually change human behaviour or inclinations.  Do inequities occur because (certain) human beings behave unethically?  A dollop of bureaucracry will settle that problem.  Are certain advisers motivated primarily by greed?  Here come a few extra principles, and perhaps a dash of corrective measures.  Do misconceptions arise because consumers don't read what they are given, or perhaps misunderstand what they are reading?  No matter, regulation will force them to understand!  And - Lo! - there was clarity.

No doubt very soon, we'll see regulatory solutions to thoughtlessness, or forgetfulness or perhaps even the way we dress.  Even as I write this (diatribe), I have a sneaking suspicion that my tie may not be entirely compliant.