The Chancellor has been urged to ease the regulatory burden on the financial services sector in his emergency budget.
The latest CBI/PwC financial services survey found the single greatest concern of firms in the industry was the rising costs of regulatory compliance.
The call comes just days after a joint move by the Prudential Regulatory Authority and the Financial Conduct Authority to introduce stringent new rules on banks, building societies and investment firms.
The regulations are designed to discourage risk-taking and ensure that senior managers are not rewarded for failure as happened following the banking crash.
The new PwC/CBI report, which covers the three months to June, also found tax stability within the financial services system was a major concern for firms.
“With the UK Emergency Budget imminent and last week’s final Remuneration Codes confirming that we now have the toughest bank pay rules in the world, it is perhaps not surprising that tax stability and regulation featured so high on the agenda,” Lindsay Gardiner, regional chairman, PwC in Scotland, said.
“When it comes to remuneration, the biggest concern for banks headquartered in Scotland and the UK is the uneven playing field that exists between here and the rest of the EU, adding to the existing differences between the EU and the rest of the world.
“Regulators will clearly be hoping the rules will help re-build trust in the City, but experience suggests that structural pay changes and penalties have limited impact on behaviour, as shown in our latest financial services report.
“It said bankers can’t be scared into ethical behaviour and suggested firms and regulators should instead focus more on creating a positive culture.”
The research noted a significant draw back in optimism in the sector in the quarter, although it remained strongly positive at +32.
Business volumes increased during the quarter and there was confidence (+39%) that trend would continue in the coming three-month period.
CBI economics director Rain Newton-Smith said: “Demand for financial services continues to strengthen, with profits holding up and employment showing signs of an improving trend.
“But the cost of regulation and tax uncertainty are a top concern for firms across the sector. They want to see the Government focus on keeping the UK a competitive financial centre by not putting UK firms at a disadvantage.”