Financiers and bankers in India are concerned that regulatory changes being brought in globally, particularly in the US and EU, could “stifle” growth and development of financial markets in India itself, according to a new research carried out by the City of London Corporation, the municipal government covering London’s financial Square Mile.

Reactions in India The Corporation, which commissioned Indian research consultancy IMRB International to gauge the reaction of senior bankers and executives in India, as well as think-tanks and credit rating agencies, looked at the perceptions of regulatory and legislative changes brought in internationally since 2008. These range from Basel III to the UK Bribery Act 2010, the EU’s Market in Financial Instruments Directive, and the US’ Foreign Account Tax Compliance Act (FACTA).

Through interviews with 33 individuals, the corporation built up a picture of attitude towards regulations, and their impact on India as well as other developing markets, noting the “disgruntlement” felt about the extraterritorial impact that legislation in the US and EU was having on India.

Some raised questions about the “appropriateness of these regulatory changes that emanated in response to issues experienced in more developed financial markets to emerging markets where problems did not transpire on the same scale and where different structures prevail.” Interviewees called for reduced stringency to allow businesses to function effectively, as well as the need to simplify regulations and introduce a more level-playing field globally.

Among those pieces of legislation to trigger the biggest concerns were the UK Bribery Act 2010, which some saw as a “non tariff trade barrier” that could lead to manufacturing and other services returning to developed nations, and FACTA, which had turned financial institutions, including those abroad, into “de facto tax collectors/informers for the US”, noting that financial institutions, particularly mutual funds, were turning their back on US and NRI investors. There were also concerns that BASEL III would hit the availability and cost of funds for banks and other institutions, impacting growth.

“Given India’s importance to global economic growth, I hope this report gives some extra valuable input to global financial regulation policymakers,” said the corporation’s chairman Mark Boleat in a statement.

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