Kyle Siskey and Elizabeth Fournier
Staff writers, US and Europe
US and European governments need to upgrade their regulators
if they want to prevent future liquidity crises and bank
collapses. And they need to do so through centralised
supervisory bodies. As one Washington lawyer comments, "we've
created a system that doesn't know risk and now we are paying
European lawyers, reacting to the unprecedented amount of
state financial intervention that banks have required over the
past two months, agree. Auto-regulation of the European banking
sector has been a complete failure, and greater regulatory
sophistication is necessary to avoid further chaos.
Alongside regulatory reforms, the fundamental way that
European banks organise themselves must be improved, with
incumbent boards coming under fire for inexperience and lack of
complex specialist knowledge.
"The people running and supervising banks are not
sophisticated enough," says one capital markets partner in
London, "many board members come...