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Monday, 15th April 2024
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Care needed in responding to the credit crisis at regulatory level Back  
 
The banking system, regulators, free markets - have all been subject to increased criticism and indeed attack as a result of the credit crisis. The latest installment, which as the summer stretches out, is the appearance of a clutch of new books on the “credit crunch”, many attributing blame to the unregulated nature of markets, and blaming those of a liberal market disposition for the greed and excess and failures that we have seen in the credit crisis. Examples, are George Soros, and others.

The usual conclusion of these analyses is that markets need to be regulated, and the excesses of free market capitalism need to be corrected by laws, and oversight, usually by public sector regulators.

While it is important, indeed essential, that the many lessons of the credit crisis are learnt. (and they are, on a daily basis, by the private sector and central bankers), it is also to be fervently hoped that kneejerk, siren calls for more, and inappropriate regulation are not heeded. For if that happens, the serious monetary and economic problems arising from the credit crisis will be exacerbated - perhaps dangerously so.

It is also the case that inappropriate regulatory moves as a result of the credit crisis within certain jurisdictions, while not shared by other competing jurisdictions, will run the risk of making those jurisdictions uncompetitive relative to others.

In that context it has been encouraging to see both the EU’s Commissioner for the Internal Market, Charlie McCreevy, and SEC Commissioner Paul Atkins reaffirm their commitment to the principles of “better regulation”, rather than “more regulation”,
as both have done in Dublin this summer, at the Finance Dublin conference, and in these columns.

It will be important though, that in moves to maintain the balance between better and more regulation in relation to moves resulting from the credit crisis (e.g. The EU proposal to establish an oversight and registration regime for credit rating agencies, and ideas on stipulating the form of securitised vehicles EU credit institutions can invest in) do not run the risk of making Europe uncompetitive in a global context as a location for investment in securitisation (which happens to be an important IFSC, not to mention EU, sector).

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