Forbes: Will Financial Regulation Trash Global Economic Security?

Alexander Mirtchev, Contributor, 3/29/2012

In an article in Forbes, Dr. Alexander Mirtchev, President of Krull Corp. and Vice-President of the Royal United Services Institute for Defence and Security Studies, poses the question “Is it not time to cease fighting against the current; or… stop trying to put the genie back in the bottle,” as far as financial regulation is concerned? The fallout from the global financial and economic crisis led to a call for increasingly tight and comprehensive regulation of the financial sector. The most prominent example has been represented by the financial regulatory reform package to ostensibly minimize risk in the financial system and maximize consumer protection, developed under the auspices of the Financial Stability Board. However, according to Mirtchev, the effects of this regulation, in particular on economic growth and global economic security, are yet to be fully articulated and addressed. In particular, the impact and costs of these regulations on the market and especially the customers of financial institutions, could have significant importance for market confidence, productivity and risk assessment. In Mirtchev’s view, “the issue is not whether or not to regulate, but what to regulate and how to reinforce, rather than distort market efficiency, promote productivity and growth.” The path toward optimal regulatory frameworks would need to focus on the financial products themselves, rather than on the process or the activities that lead to them. Appropriate regulation would have to ensure transparency, information and education about the outcomes, in order to address systemic risk issues and be conducive to growth. Ultimately, this could entail unleashing a “global financial mega-market” of mass participation, based on new and upcoming technologies, as well as advancements in the financial services sector.

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