EU twatishness on bank regulation

No, leave aside what the regulations should be for a moment and think about who should be designing them and how.

The men are concerned about \”maximum harmonisation\”, an idea gaining traction in Brussels, which will see national rule books applying the same standards in areas such as capital and liquidity requirements.

Mr Sants said: \”Within the European Commission there is discussion about standardising rules.

\”In other words, national regulators could not allow banks to go above or below the European standard… all we would be doing is policing European fixed standards.\”

Ah, no, that\’s not the way we should be going. Recall what we had under El Gordo. A set of rules adminstered by the FSA. Written, firm, rules, with bureaucrats ticking boxes.

Did that work? No, it didn\’t did it?

What we actually want to return to is the old system of Bank of England regulation. One where, while there are of course rules, there are also unwritten rules. Where it is possible for the regulator to call people in and say \” that\’s not on\”. For that\’s the only way that regulation can be done in something as fast moving as finance.

Local regulation by local people for local markets.

UK regulatory bodies such as the PRA, which are designed to apply a forward-looking, judgment-based style of muscular regulation, could be left weakened.

Exactly. So bumping the rule making up to EU level is exactly the wrong thing to be doing.

4 comments on “EU twatishness on bank regulation

  1. …….bumping the rule making up to EU level is exactly the wrong thing to be doing……

    Tim, You surprise me 🙂

  2. Tim – do you actually know much about the history of banking regulation and bank crises? Perhaps you do, but it seems to me quite obvious that the City and the companies working in it might have changed sufficiently since the 1970s to make the ‘old chap this isn’t on, not cricket’ approach unworkable.

    Tim adds@ Possibly. But we know absolutely that rules based with pencil sucking bureaucrats doesn’t work at all.

  3. But do we know that – many countries managed to avoid banking crises – are you saying none of them had a rules-based approach?

  4. Matthew, my take is that the problem is with the rapid development of new financial instruments. The rule book and definitions of capital adequacy were unable to keep pace. Any system of regulation needs to ensure that banks with unstable business models fail – and are not so big that they endanger the whole system.

Leave a Reply

Name and email are required. Your email address will not be published.