Apcims warns against over-regulation

Wealthy people could end up paying more for their private banking services if the government imposes fresh regulation on private banks, an industry body is to warn today.

Private client wealth managers are fearful that any new government regulation of the financial services industry in the wake of the credit crunch will be applied in a ’one size fits all’ approach that would damage the level of service they could provide to their clients.

The Association for Private Client Investment Management and Stockbrokers, whose members manage £400bn of the UK’s wealth, will raise the issue at a debate at the Securities and Investment Institute in London this evening attended by Liberal Democrat shadow chancellor, Vince Cable.

APCIMS chief executive David Bennett told the Financial Times that if expected new regulation is applied to private wealth managers as well as banks, the costs would eventually have to be passed on to clients, damaging the industry.

It is widely expected that financial services will be more stringently regulated in the wake of the credit crunch, which could include tighter rules on capital adequacy.

Alistair Darling, UK chancellor of the exchequer, wrote to members of the G20 group of leading economies earlier this month to propose measures including giving regulators greater powers over banks’ business models.

But APCIMS believes private client wealth managers should be exempt from further regulation, since they have different business models to banks and are not exposed to credit and liquidity risk.

Private wealth managers and stockbrokers are already required to comply with European regulations, known as Mifid, which came into force in November 2007. But Mr Bennett argued that his members had seen very little benefit to clients and huge costs in implementing the new rules.

“There are likely to be changes to capital adequacy requirements to banks as a result of what has happened and that’s an area where we’d be particularly concerned,” he said.

“If the regulatory regime you have to obey is very costly to implement it’s just adding bureaucracy.”

“Those costs eventually get passed on to clients,” he warned.

Mr Bennett will tell the panel this evening: “It is obvious that regulation carefully and specifically targeted at the relevant activities within the banking sector is part of the solution to the current financial crisis.”

“However if that regulation overspills into the private wealth management and stockbroking sectors which are victims of the crisis we will pay a very high price not only in the UK but globally.”