Tuesday, July 3, 2012

Banking: Better Not More Regulation

The recent Libor scandal has given politicians another reason to focus attention on the failing in the banking industry and away from their own glaring inadequacies.

The danger is that the dividends that banker bashing pays in the ballot box will lead to greater and more complex banking regulations. But surely that is what we need? Well, no. What we need is better (also less and simpler) regulation and real punishment for those who to transgress the rules. Those who thought it was a great wheeze to fiddle the interbank lending rate should have been in no doubt before they started that a) it was illegal and b) it was punishable by a stiff prison sentence. In reality, even if a bent trader knew what he was doing was wrong he never really felt like anything would be done about it.

It's worth a listen to Niall Ferguson's Reith Lecture, part 2 - The Darwinian Economy. He makes the above point very powerfully. We need better, simpler regulation and genuine punishment for those who transgress...


No comments:

Post a Comment