UK- Howard Davies, chairman of UK regulator the Financial Services Authority, has rounded on the raft of directives contained in the European Commission’s Financial Services Action Plan.

Speaking at a dinner attended by senior financial services executives, Davies welcomed the Lisbon commitment to open markets and to dismantle barriers to cross border business. But, he added: “a general commitment to openness and flexibility has turned into a Financial Services Action Plan made up of 42 lengthy and detailed directives.”

He cited a growing anxiety about the programme and said that some in the city argue “not unreasonably” of a lack of consultation on some of the commission’s proposals. Many of the proposals are the product of what he referred to as unsatisfactory original drafts.

“In particular I detect increasing anxiety about what we know, in the jargon, as the maximum harmonisation approach. There is a world of difference between directives which set minimum standards which must be met to ensure mutual recognition across European borders, and directives which say that you can do things anyway you like as long as it is precisely set out in the directive, no more and no less.

“This imposes a one-size-fits-all approach on European markets, which simply does not reflect the reality of the differences from one member state to another.”

He went on: “in this area we can do our bit within the covens of European regulators. But these are primarily legislative issues, which are for governments, and governments are influenced by market participants, rather than by us. Fortunately over the last few months, I have noticed a new level of interest in European regulatory proposals in the city.”

During the speech, Davies touched on the subject of hedge funds saying that the FSA felt there was more scope for transparency. And although the level of leverage in hedge funds has fallen considerably, he said it remains a source of concern.

He defended the practice of short selling describing it as: “a normal activity which, indeed, has some plusses associated with it in terms of speeding the necessary process of price adjustment.”

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