The FT and IT report on Jacques de Larosière’s call for a reform of European financial regulation. de Larosière’s report
recommended the establishment of a body under the auspices of the European Central Bank to develop policy and provide risk warnings to European Union supervisors. It also proposed another body to co-ordinate the decentralised network of supervisors monitoring individual institutions and markets.
The FT reports that “European banking and insurance groups welcomed the conclusions”, but I don’t suppose that this in itself should lead us to reject them outright. Eurointelligence is extremely disappointed by the absence of a proposed EU-wide super-regulator, while the FT likes the proposal. Supervision and coordination of the existing supervisors, who have failed, does seem much less attractive than having one new central regulator, and so I tend to side with Eurointelligence. On the other hand, the new European supervisory structure “would combat regulatory arbitrage by: deciding compulsory minimum EU-wide standards; providing binding mediation between disagreeing national authorities; and coordinating international “colleges of supervisors”.
One reply on “The division of regulation depends on the extent of the market (or at least it ought to)”
I think it is important to remember that regulation has one major lobbyist that is totally forgotten in most articles – and that is the financial services industry.
Industry and practitioners have called for regulation far more than many state oriented bodies have, a strong regulatory system instils trust in the system (which is confidence based) and sets rules, practice and principles.
when these are abused it isn’t a regulatory failure, its a dishonest/criminal failure, the same way as a person who commits murder doesn’t mean the legal system has failed, rather it is down to ensuring responsible people hold the responsible posts.
practitioners are not even being included in much of this talk and yet it is the actual practitioners who carry the brunt of the decisions and must actually implement the rules!
A europe wide regulator would be excellent, and allow for efficient flow of financial workers to other jurisdictions because they would know the framework already, it would also help to expand competition as other entrants may decide to go into foreign markets with more clarity.
one reason the likes of madoff etc. get away with what they do is because of the jurisdictional approach to regulation and the ability to interweave business in several areas of responsibility.
we need a single regulator, it would give standardisation and increased transparency as well as greater responsibility, it would also be able to attract the best talent from across Europe rather than having to rely purely on home-grown regulators. one regulator to rule them all, one regulator to bind them.