With companies on both sides of the Atlantic contemplating a raft of regulatory measures around financial accounting, leading European commentators called on European and US regulators to seek a common international approach.
In a damning speech, Paul Druckman, president of the Institute of Chartered Accountants in England & Wales (ICAEW), warned that regulatory overkill could destroy any hopes of convergence on both sides of the Atlantic, which could ultimately impede investment and job creation. Referring to the myriad regulations facing listed companies in developed markets, Druckman said, Standards of thousands of pages impose costs that inhibit growth. The problem is particularly acute for developing nations that want to join in the global economy, adding that international standards should not be the preserve of an exclusive club.
Druckman made the comments at an ICAEW conference in Brussels on the challenges facing business and government in the development of global capital markets. Not missing an opportunity to poke holes in the controversial US Sarbanes-Oxley legislation, Druckman said companies in developed countries questioned whether the benefits of such legislation outweighed the cost of compliance. In an aside, he added that talk of convergence between US GAAP and International Financial Reporting Standards (IFRS) would result in more rules-based standards. The upshot of all this may be that the potential economic powerhouses of the future are simply unable to adopt global standards, he said.
At another conference on transatlantic convergence, in Luxembourg in April, James Leigh-Pemberton, chairman, Credit Suisse First Bostons European investment banking division, had called on financial leaders participating in the US-EU Summit in Washington this June to urgently address the issue of regulatory convergence of transatlantic capital markets. He called on the Committee of European Securities Regulators (CESR) not only to consistently implement across Europe recommendations that formed part of the European Commissions Financial Services Action Plan, but also to work closely with their US counterparts. The EU is on the brink of a tremendous reform opportunity, and the securities industry in the EU and the US has an important role to play, he stated. We need to continue pushing for the harmonization of the EU internal market as well as the ultimate convergence of the transatlantic market.