Gallic charm offensive – Michael Barnier, Internal Markets commissioner

Europe has a new commissioner for internal markets in French politician
Michel Barnier. His appointment has left the City stunned and observers
believing the IASB has new opposition in Brussels.

What’s happened?

Michel Barnier is a former member of Nicolas Sarkozy’s government who finds
himself commissioner for internal markets, taking over from Irishman Charlie
McCreevy.

This puts him in charge of approving Europe’s approach to accounting
standards, financial services and company law. It is an influential position at
the heart of many of the regulatory debates that have arisen from the credit
crunch.

At 58, Barnier is a career politician having first been elected to the French
National Assembly at 27. Having served in the French cabinet he is close to
Sarkozy, something the president has been crowing about since the appointment.

What happens next?

It’s Barnier’s potential influence that has many in the City feeling
downcast. He has an opportunity to get a grip on financial regulation, with an
agenda informed by years of working with Sarko. That means potentially more
intervention and less market freedom.

Some see it as a direct attack on the City of London and its success.

But then, there’s also international accounting standards. Over the past
couple of years the French have made their view clear that the IASB is not
accountable enough (despite recent reforms to its constitution) and has
unjustifiably stood by the fair value principle, which they blame for
exacerbating the credit crunch. French finance minister Christine Lagarde has
written in the Financial Times with much less than whole-hearted support for the
board.

With such a history, is it any wonder there is a degree of pessimism around
about the agenda Barnier may bring to his internal markets brief?

Barnier comes to office with room to manoeuvre too. His predecessor,
McCreevy, failed to endorse the IASB’s constitutional reform, after saying he wo
uld, and withheld approval for the changes to fair value in IFRS 9 (changes that
were, in part, driven by concerns in Brussels). Barnier therefore has freedom on
these two pieces of accounting policy, if he wants to damage the work of the
IASB or, indeed, openly challenge its legitimacy.

In accounting circles there is astonishment at the way Barnier seemed to ease
into office unchallenged. An insider told Accountancy Age that not a
single rumour emerged of a possible UK candidate for the job. They believe the
government was too distracted by the position of new president for the EU to
seriously consider that internal markets was the more crucial role for the UK to
influence.

The City is equally dumbfounded. The UK relies on financial services and yet
Number 10 seemed to abandon any effort to influence the internal markets
position. Whatever the approach of the past, Barnier is the man standard setters
and regulators have to deal with now.