Lord Turner argued that there are good reasons for rejecting the view that all of the increase in financial activity has delivered real economic value; there are, he notes, good reasons to suspect that what has taken place is a mix of value added and rent extraction. He explored the consequences of this conclusion for policy-makers in his speech and, with regard to financial regulation reform, argued that much has been done but more needs to be done, in particular (to quote directly):
- Basel III is a major step forward, but in an ideal world, equity ratios would be set much higher.
- We must understand the drivers of shadow banking and guard against the re-emergence of new risks in new financial mutations.
- Complexity and interconnectedness are important in themselves, and specific regulatory action to offset the externalities created may be required.
- We need to make a reality of macro-prudential oversight and policy response.
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