Banks facing over-regulation, says OECD head

Posted by BankInfo on Sat, Mar 05 2011 06:52 am

Banks face a period of over-regulation caused by public outrage over lax supervision that led to the global financial crisis, OECD chief Jose Angel Gurria said on Friday. Ever since the 2007-2008 slump, regulators worldwide have moved to strengthen supervision of large banks and other financial institutions. “We blew it so badly that right now there is a pendular movement toward too much regulation,” Gurria told 600 senior financiers attending the spring meeting of the Washington-based Institute of International Finance (IIF). “Don’t fight it—it is going to happen no matter what. People are too scared, people are too angry, the consequences have been too massive,” Gurria told the forum held in New Delhi.
Financial institutions in mature economies are being blamed for irresponsible lending and risk-taking that led to the worst global downturn since the 1930s Great Depression.
“We share the responsibility” for the events leading up to the crisis, said Gurria who heads the Paris-based Organisation for Economic Development and Cooperation.
“The banks are a very good villain (in the public eye) and maybe we will have a period when we have too much
regulation as an inevitable political result of the crisis and then maybe we will get it right,” he said.
Gurria’s comments came as the IIF, which represents 430 institutions from over 70 countries, said the regulatory crackdown on financial bodies could hurt economic recovery by curbing banks’ critical funding role. “Never before have so many regulatory reforms been determined or planned” by different nations, said IIF chairman Josef Ackermann.
Ackermann called for better global coordination in drafting regulatory policies on the need for banks to hold more capital, pay higher taxes and other reforms in order to avoid the creation of “uneven playing fields.”
He urged that authorities around the world take stock of regulations that “are in train” to see how these will affect the financial system. 

News: The Independent/Bangladesh/05 Mar 2011