December 8, 2010
Regular readers of this blog may recall that financialguy has made repeated calls for less new financial rules and more financial policemen.
This may be a simplistic approach, I agree, but there is an awful lot of financial regulation already in existence and a very well known lack of financial supervision.
Now, months too late, it seems like the European Commission is getting in on the act and looking at the implementation of all these rules.
Alas, their plan – as ever – involves harmonisation. Utterly pointless in this regard I would suggest. Who in investment banking really cares if punishments are less in Slovenia than they are in the United Kingdom or wherever? (I ought to point out that I didn’t look into the differences between those two countries.)
In a report just released and communication reported on here, the rules cover lots of areas with apparently low levels of real traction.
What Could The Commission Be Doing?
Simple to my mind. They need to be creating a formal pan-European training institute (think of the College of Europe) that teaches graduates (preferably with maths, business or finance degrees) how to investigate and regulate financial markets. This needs to be a well-respected and well-paid profession.
They ought to take people in from around Europe and later the world and train them in 12 months to be mean-spirited, hard-nosed tough-nuts that understand markets and derivatives and can tackle and confront traders.
Then they need to start graduating 200+ pupils per year so that by 2030 there is a complete generation of competent and experienced professional regulators keeping the markets in line.
If this reads as if I am suggesting that a pan-European army of regulators needs to be created, that is the aim. There simply are not enough policemen to keep an eye on the investment banking community.
Yes, penalties need to be stronger. That is self-evident. But if there is no application of laws, why worry about penalties? Once there is a fully-functioning continent-wide legal force that is well integrated with each other and has good links across the EU, then tougher penalties might actually mean something.
The Commission’s communication is based on reports from three organisations:
Some of my previous thoughts on this topic can be found here:
When Is A Fine Not A Fine? 05/10/2010
Do We Need More Financial Regulations? 15/03/2010
Who Can Regulate Derivatives Contracts? 22/10/2009financialguy