Good regulation ‘essential for island to succeed post-Brexit’

William Mason’s general message was that fears regulation can damage growth were unfounded, but he agreed that it could harm growth if it was arbitrary. ‘Done well, it can create an environment where people are secure enough to execute trades and make investments which they would otherwise have been unwilling to make, thus driving growth,’ he said.

Growth and regulation was the theme of Mr Mason’s talk, in which he sought to counter those in the island who might feel that the GFSC itself should be abolished or at least have its powers reduced.

‘Laws which stop you doing things are generally irritating when you want to do that thing,’ he said, using the idea of deregulating the Guernsey speed limit as a way that would benefit some, but could deter others from using the roads.

He said that in many walks of life, things that might at first glance seem to be in opposition to each other can often be closely related in what can be a mutually supportive way.

‘To be clear, I am far from unsympathetic to the libertarian view that if one was to take a scythe to the growth of regulation, everything would be wonderful,’ he said, and referred to countries such as India between 1941 and 1991 where over-regulation has actually stifled growth of the country in relation to others.

But on the opposite side, it was not necessarily the case that countries with the fewest rules grew fastest, he said.

‘The issue would thus appear to be not of whether growth and regulation can co-exist but what level and type of regulation is optimal for economic growth.’

In the light of this, the GFSC had set out its goals in its Regulatory Framework guide last year, among them promoting confidence in the Bailiwick’s financial services markets, preventing financial crime and creating incentives and disincentives to promote ‘desired market behaviour’, among other things.

He went on to detail work done by the commission in initiatives that it believed would help create the right regulatory environment for growth, such as the creation of dedicated insurance linked securities rules and rules for private investment funds.

This could also bring positive benefits in the future, as the UK leaves the EU and takes back control of its own trade negotiations.

Earlier this year, the Institute of Economic Affairs had suggested that the UK should make bilateral agreements with other major financial centres, including the Channel Islands.

‘There is a considerable prize for Guernsey’s main exporting sector if it can gain access to such free trade agreements,’ said Mr Mason. ‘For the UK to be willing to allow Guernsey to become part of a free trade agreement which contains a strong financial services component which it has negotiated with another country, it is going to have to be comfortable that Guernsey’s financial services regulation meets the same common international standards as it and the country with which it has negotiated the free trade agreement.

‘This, with a view to the medium-term future, is another reason why, in a Guernsey-specific context, our regulation can be seen to be a necessary prerequisite to safeguard a reasonably probable and economically significant future growth opportunity.’