Regulators are perceived to have the reaction time of a tanker. What's your response?
We should make sure the tanker is accompanied by speedboats. Regulation is unlikely to capture all contingencies, so we should not even try. General rules are less rigid and can be adapted quicker.
If more regulations are introduced, how can we avoid “regulatory overload”?
If we find we have overreacted to the 2008 crisis, it is fair to again readjust regulation. However, it must be done on the basis of strong principles. If there is a risk of stifling small and medium enterprises, then regulation should be dialed back rather than exceptions being made.
Is there a risk of unintended consequences if this approach is not enough?
Fortunately there are benefits to taking time. Before new legislation becomes effective, regulation has time to mature in consultations with all stakeholders. This largely mitigates the risk of unintended consequences.
What about if regulators lack resources – what would the implications be?
They could be dire. It is not sensible to reduce the budget of a newly created regulator. While the cost of compliance may be high, the cost of non-compliance can be even higher.
Assuming the financial crisis was a catalyst to financial integration in Europe, what is the benefit?
While the concept of a capital-markets union is not entirely clear yet, a single European capital market would eliminate many barriers. It could encourage investors to look to invest beyond their domestic market.