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Last century is mired with hordes of Financial turmoil that inflicted discomfort and vex to the global and regional economies one after the other. The new century though commenced with the fervor of prosperity and success’ suddenly despite in the presence of complex forecasting models and all the incumbent rules and regulations’ fractured to surface the faltering underlying snags in the financial tectonic plates that now carries the entire world. While such crisis can not be halted altogether, the crux of redressing the current problems should be to cripple the momentum and magnitude of the next financial tremors. Thus the intention behind the transformation of the economy’s body language should be Better Regulations along with strict implementation rather then the tirade of more rules. Especially the realm of Micro-Regulations in Base 2 should be added on with Macro-Regulations that honors the phenomenon of developing through the roots rather then form superficial tissues.
The world has seen more then Hundred Banking crisis but each time these are the bankers who are chided, emergency plans are put into place to cover the loop holes and the story starts again after filling the last ditches without identifying and erecting the most fundamental causes that unfurl the fault lines again. The current quagmire is just an extension and re-happening of the very fundamental and yet inevitable boom burst cycle. These are the banks that render successes and yet fail the Capitalist structure (Predominant system ruling the global economy), thus protecting them is not only vital for health of any financial system but it failure bodes evil for the entire economy, thus regulations which can not halt the collapses are worthless at best. And the root cause of banks crashing out when the social cause of Systemic financial crumple surpasses private cost to individual financial entities. Thus the new set of rules should be such that to transform these externalities to get internalize! Desist the Fall out…
There has always been a tendency to reshape the regulatory system before pondering into complexities of regulatory controls. But it is quite the opposite; the regulations should be erected to project the purpose and reach of the regulatory authority. There also lies difference in the needed professionalism to cater to Micro/Macro prudential regulations, while the former be carried by FSA, the later should come under the domain of Central Banks.Thus a more collaborative, integrated and consolidated approach world wide, first to stabilize the highly turbulent system form spilling more disaster and then to strengthen it on new foundations.
Muhammad Shafqat
Feb 2009
