CFI Annual Debate 2012

The Centre for Finance & Investment Annual Debate 2012 took place on Wednesday 17th October. Entitled "Should Financial Markets be More Heavily Regulated by Government?" the debate was attended by practitioners from the Edinburgh financial community, academics and postgraduate students.

The first speaker, Professor Philip Booth, Editorial and Programme Director at the Institute of Economic Affairs, argued that financial markets should not be more heavily regulated by government. He stressed that this did not mean that they should not be regulated, but, historically, government regulation had been a failure (especially during the crash) whereas mechanisms of regulation evolving in the market itself had been successful. Government regulation of pensions, securities markets and banking had all done a great deal of damage.

Ian Fraser, the well-known financial journalist, then set out the opposing view. He said that the reforms introduced by President Franklin D. Roosevelt in 1933 demonstrate that well-drafted regulation and legislation can inspire confidence in markets and transform a country's banking and financial sector. And the reforms only worked because they were stringently implemented and enforced. Self-regulation has not worked particularly well in accountancy and the law, where it often veers towards self-interested protectionism that is harmful to the public interest.

Terry Arthur and William Dinning then gave their views on the subject. Terry Arthur said that the wider issue concerns government-based regulation of all types; the same forces are at work whether we are considering finance, education, trade and industry, health and care, and quangos generally. The fault-lines in these bodies are not difficult to spot. William Dinning argued that in the modern world financial regulation needed to be globally coordinated. The largest banks are global in scope and many of them are “too big to fail” in the sense that they could not be rescued by a single sovereign. Dealing with this requires cooperation and coordination to prevent taxpayers in one country being liable for losses in another country without any say in the regulatory framework in which the failed bank operated.

A question and answer session followed, and the debate concluded with a reception for attendees.