Removing the banks' comfort blanket

Article by Philip Booth in the Sunday Times

THINK TANK: NEW IDEAS FOR THE 21ST CENTURY

REMOVING THE BANKS' COMFORT BLANKET: REGULATION CAN FUEL FINANCIAL EXCESS

The standard view of the crash of 2008 is that it was caused by greed and instability in unregulated financial markets. This thesis does not fit the facts. The general trend has been towards more interference by the regulators.

Try drilling down into the Financial Services Authority (FSA) handbook to get a feel for so-called “light-touch, principles-based regulation”. The full handbook contains 10 sections. The section entitled “prudential standards” is divided into 11 sub-sections. The sub-section “prudential sourcebook for banks, building societies and investment firms” is made up of 14 sub-sub-sections. The sub-sub section “market risk” is divided into 11 sub-sub-sub sections. The sub-sub-sub-section on “interest rate PRR” has 66 paragraphs.

It is not just the FSA that has been generating financial regulation...

Read the full article at The Sunday Times.

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