Jim O’Neill: regulators escaped blame for crisis

Author: Danielle Myles | Published: 2 May 2014
Email a friend

Please enter a maximum of 5 recipients. Use ; to separate more than one email address.

The BRIC creator queried UK plans for a central share registry and jail terms for bankers
Regulators have not received their fair share of blame for the financial crisis, the former chair of Goldman Sachs Asset Management has said.

Delivering the keynote at yesterday’s Guernsey Funds Forum, Jim O’Neill, creator of the emerging market acronym BRIC [Brazil, Russia, India, China] queried how much faith could be placed in financial authorities.

"A lot of the damage of what we went through was caused by bad regulation," O’Neill said.

While many constituencies contributed to the financial crisis, he believes its seeds were sown by market overseers, the majority of which still hold their positions today.

"Having worked in finance for 35 years, financiers will do what they think they can get away with until getting stopped or hitting a crisis," the economist said. "It is the job of good regulation to take the punchbowl away before that."

He described the reactionary nature of rulewriting as "fighting yesterday’s problems", and queried financial reforms proposed by the UK government.

This includes jail terms for bankers found liable for reckless misconduct. The popularity of the proposal, which features in the Banking Reform Bill, concerns O’Neill; especially when regulators themselves have not necessarily paid the price for their shortcomings.

He also branded last week’s proposal for a public share registry as a populist move. The change would scrap bearer shares and force companies in the UK to publish a list of their beneficial owners.

On its face, this is to improve transparency and minimise tax evasion and money laundering. But O’Neill described it as "an easy sound bite". Commenting on Prime Minister Cameron requesting the UK’s overseas territories and Crown dependencies to make similar changes, O’Neill said: "Whether he really has a personal view on it, I doubt."

" It is the job of good regulation to take the punchbowl away "

It’s an example of the broader problem plaguing western intellectual leadership, he said. Many in positions of authority take the path of least resistance, doing what will be well received rather than what is necessarily right.

Fiona Le Poidevin, chief executive of Guernsey Finance, noted that a registry goes against the pursuit of a level playing field of financial regulation. While the European Parliament has voted through similar plans, they have not yet been adopted and no other jurisdictions have announced similar intentions.

"I’ve been in China talking to people about this, and they say 'we won’t go anywhere near Europe if you are going to make all of our information public’," said Le Poidevin. There are many reasons why investors don’t want their details publicly accessible, including human rights and data privacy.

Related links

Is MIST the next BRIC?

Morgan Stanley: the truth about emerging markets

Frontiers – new markets, new rules