Bank rescues compared

Author: | Published: 17 Nov 2008

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 for it."

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...