Closing the gaps in bank regulation. The international response to the banking crisis has been encouraging
After last year's panicked injections into the global economy of billions of dollars (and pounds, and euros), there were alarming signs that governments and central banks were also planning to pump in a mass of terrible regulation – despite the fact that nothing would do more to hinder recovery than a confused regulatory regime supported by unworkable accounting standards.
Happily, the decisions that are now being taken about the shape of the world's financial services industry, and how it will be supervised, seem broadly along the right lines. Alistair Darling, Barack Obama and others recognise the need to close the gaps in regulation through which some large companies fell. They say that banks must set aside greater amounts to cushion themselves against downturns, and curtail their more casino-like activities. Supervisors across borders need to talk more, and moderate the risks contained in the derivatives market, which have been revealed as toxic for the whole financial system.
But it is the detailed implementation that counts.
Mr Darling wants bank directors to do their jobs better, but his Mansion House speech last night left proposals on corporate governance to another date. There is also the risk of a European ambush of London's hedge fund industry – an easy target for punitive regulation, but one which played little part in the meltdown.
Success on most fronts will be determined by difficult talks with other European governments. But that will pale in comparison to the turf battles and compromise already apparent in Mr Obama's proposals. Not only has he missed a chance substantially to reform insurance regulation, but the interaction of new and old regulators is unclear. His plans now pass to Congress. Legislators could clean them up – but a savage and unproductive mauling seems more likely. ( telegraph.co.uk )
After last year's panicked injections into the global economy of billions of dollars (and pounds, and euros), there were alarming signs that governments and central banks were also planning to pump in a mass of terrible regulation – despite the fact that nothing would do more to hinder recovery than a confused regulatory regime supported by unworkable accounting standards.
Happily, the decisions that are now being taken about the shape of the world's financial services industry, and how it will be supervised, seem broadly along the right lines. Alistair Darling, Barack Obama and others recognise the need to close the gaps in regulation through which some large companies fell. They say that banks must set aside greater amounts to cushion themselves against downturns, and curtail their more casino-like activities. Supervisors across borders need to talk more, and moderate the risks contained in the derivatives market, which have been revealed as toxic for the whole financial system.
But it is the detailed implementation that counts.
Mr Darling wants bank directors to do their jobs better, but his Mansion House speech last night left proposals on corporate governance to another date. There is also the risk of a European ambush of London's hedge fund industry – an easy target for punitive regulation, but one which played little part in the meltdown.
Success on most fronts will be determined by difficult talks with other European governments. But that will pale in comparison to the turf battles and compromise already apparent in Mr Obama's proposals. Not only has he missed a chance substantially to reform insurance regulation, but the interaction of new and old regulators is unclear. His plans now pass to Congress. Legislators could clean them up – but a savage and unproductive mauling seems more likely. ( telegraph.co.uk )
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