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Finance Industry: Not Enough Regulation To Avoid Another Crisis - Global Survey

Sandra Kilhof, Reporter, London, 4 December 2013

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Just 3 per cent of financial services professionals believe that the regulatory changes implemented since the banking crisis of 2008 have done enough to prevent a future crash, according to a global survey.

With the tidal wave of financial regulatory changes such as the UK [tag|RDR|]Retail Distribution Review[/tag] and the US Dodd-Frank legislation, one would think that lessons have been learnt from the financial crisis. However, just 3 per cent of financial services professionals believe regulatory changes implemented since the banking crisis of 2008 have done enough to prevent a future crash, according to a global survey by financial services firm, [tag|Kinetic Partners|]Kinetic Partners[/tag].

Even more strikingly, only 12 per cent of respondents say regulators fully understand how the financial crisis was allowed to happen in the first place, the survey showed.

These findings were nearly identical at the most senior levels within financial services firms, with only 4 per cent of “c-suite” executives believing that regulation had adequately mitigated the risk of another crash, while 39 per cent said it had been only partly addressed.

The survey polled over 300 financial industry professionals and when looking at the industry sectors more specifically it revealed that more than half of those who work for banks, asset managers and hedge funds globally, and almost two-thirds of those based in the US, feel that changes to regulation have not created adequate safeguards to prevent a future crash.

“Five years on from the trauma of 2008, there appears to be very little confidence that any real lessons have been learnt. That should not only worry regulators, but should also prompt financial services firms to examine their own risk management and controls and ask how well they have mitigated the risks of another crisis,” said Andrew Shrimpton, global head of regulatory compliance at Kinetic Partners.

The 2014 Global Regulatory Outlook also revealed that very few people believe that regulators really understand the causes of the financial crisis. More than one-third said the financial watchdogs still don’t understand the underlying reasons and triggers for the crash of ‘08, while nearly half (47 per cent) said that regulators only partly understood the causes.

As such, Kinetic said that the onslaught of new financial regulation in recent years is not likely to curb any time soon.

“Without agreement over the causes of the crisis, it’s not surprising that firms doubt the effectiveness of recent regulation. There is still a lot of scope for collaboration between firms and regulators to establish an effective framework – not least because political pressures are never far away when discussing financial regulation. No one should expect the pace of change to slow up,” concluded Andrew Shrimpton on the basis of the surprising findings.

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