Earlier this week, a group of leading academics called for a revolution in financial regulation. This call came after the publication of a group of papers examining regulation across every field of financial services. A revolution - in the proper sense of the word - takes you back to where you should be. This is what should happen with regard to financial regulation.
It is commonly thought that we have seen a huge liberalisation in financial regulation in recent years and that this was responsible for the financial crash. Across most sectors, this really is not true – certainly in the UK. Until we entered the EU, there was virtually no specific regulation of insurance companies. There was, however, in the case of life insurance, an excellent but simple law that facilitated the orderly winding up of insurance companies and which required disclosure. We have now moved to very prescriptive regulation of both the sales of financial products and of insurance companies themselves. This regulation is about to get tighter through the introduction of Solvency II in the EU. The UK often blames the EU for over-regulating our businesses, yet this dreadful piece of regulation is British born and bred. In its present form, the academics who signed the statement argue that Solvency II will damage insurance companies and may well lead to financial contagion