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More Regulation or Better Regulation?

At this week's Securities & Investment Institute debate in London's Mansion House some eminent speakers in front of an expert audience debated "In this current financial environment, more financial regulation is a major part of the solution".

The speakers for the motion were Vince Cable, Liberal Democrat and Shadow Chancellor and David Bennett, Chief Executive of APCIMS and those against was Michael Mainelli, Chairman of the Z/Yen Group and Alan Yarrow Chairman of LIBA and Group Vice Chairman of Dresdner Kleinwort.

The interesting point from all the presentations was that they were on the whole agreeing. All agreed that better regulations were needed and should be enforced by better quality people at the regulators. All agreed that after the financial crisis new regulations would be introduced but not necessarily more, which was the main disagreement point.

The audience were energised by the speakers in a very active debate and by and large were all for the points being presented by the speakers. It's amazing how we are now, all wise men, after the event.

What appears certain is there will be wholesale reviews of existing regulations in the UK and no doubt London will be the first to implement them. The rest of the world has a less resilient regulatory structure and will take time to introduce the stringent rules necessary to rebuild confidence in the finance system and the markets.

The 21st century markets are global with very few banks dominating which creates a systemic risk, when threatened by economic problems which are outside of their ability to control. Much of the existing problems the world faces are a combination of failed government policies and volatility in the energy markets. The credit crunch is one ingredient in a cocktail of disasters and the banks have been powerless to effect solutions, apart of course from errors of their own making. The resolutions to long term problems will also require a cocktail of solutions and collaborations between global governments, industry and regulators.

Michael Mainelli made the point that banks have got too big to fail and that a dominance of only a few behemoth banks has stifled competition. This is a point well made and one that I have referred to in the past in my blogs.

Possibly part of the solution will be for government owned or part owned banks to be split up and put back into private hands. Could this be a start of a new age where extreme competition returns to the financial markets?

By the way the vote was a close one and the motion marginally defeated, which indicated the closeness of the presentations.


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Gary Wright

Gary Wright


BISS Research

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19 Sep 2007



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