They need a second opinion

Statement from the meeting of EU finance ministers and central bank governors (ECOFIN) in Prague —

The Ministers and Governors singled out the excessive focus on the supervision of individual financial market institutions and the related neglect of systemic risks as shortcomings of the current system.

Does anyone think that individual regulated institutions were suffering from excessive regulatory focus in the last 10 years?   If so, which one?  RBS, Hypo, Fortis, SocGen?  Inquiring minds would like to know.

4 thoughts on “They need a second opinion

  1. Conservative regulations haven’t saved Spanish banks. It just took a little longer. Direct intervention into some markets may be a better idea than just regulating financial institutions.

  2. Paradoxically, the most regulated financial institutions (like CDS-infested heavily regulated insurance giant of AIG) were the ones who caused the most damage to World financial system. The least regulated (like hedge funds) were the least to cause current financial turmoil.

    I do not make any conclusions. But, apparently, simplistic notion “regulation is good, no regulation is evil” is not that straightforward.

  3. I don’t think individual banks were excessively regulated, though it did lead to some clunky, ill-conceived, tick-box implementations within the banks. On the other hand it would have been useful if the regulators had looked at the market as a whole and asked why nobody was properly pricing for risk.

  4. I don’t think that sentence says what you’re excoriating it for. The claim is not that anyone actually regulated individual institutions, but rather that they conceived of their jobs as being to regulate individual institutions rather than to make sure the whole system didn’t blow up. They didn’t do that job well either, but there’s a good argument to be made that we now have a financial system where (almost) everyone can be operating within the letter of their rules, but the whole thing still goes south when there’s a shock.

Comments are closed.