The UK’s principles-based regulation of the financial services sector stands as a “balanced model” for international counterparts to adopt, according to Treasury Economic Secretary Ed Balls.

He told a regulation conference yesterday the country’s new regulatory system is one of the market’s key strengths, allowing the country’s regulator, the Financial Services Authority, to do its job without impinging on market workings.

“One of the features of principles-based regulation is the flexibility that it offers senior management in firms to take the decisions that are right for their business and their customers,” Mr Balls said.

He says the argument over principles-based regulation is “being won” in Europe and internationally.

“It is all very well championing better regulation at home, but we can only achieve real outcomes if we also influence decisions in Brussels – on whether to legislate, and if so, to legislate in a targeted way that opens up European markets without at the same time putting in place an overly prescriptive and harmonised legislative framework that acts as a straightjacket, and stifles innovation in our markets,” he said.

“Internationally, too, we are increasingly looking to break down barriers to trade in financial services – both transatlantic and also with other established and emerging economies.

“For this to work, authorities on both sides need to trust the regulatory regimes in place – and we need to make the case for a principles-based approach at the global level too.”