‘Global regulations will lead to global failures’

From: GFSNews.com

The man behind Nomura’s deal to buy Lehman Brothers’ has expressed doubts over aligning financial regulations on a global scale, saying that it will lead to worldwide regulatory failures.

Speaking on Tuesday at the Economist’s Bellwether Europe summit, Sadeq Sayeed – who is now chairman of Metage Capital – said that while global regulation sounded like a good idea, the implications of a failure would be too far-reaching were it all to go wrong.

He said this was especially true while regulators are still failing to understand the huge impact that important decisions – such as refusing to bailout Lehman – can have on the markets.

“At the end of the day, if you have consistent regulation globally, it all sounds nice, it all sounds beautiful, but in reality what you do is you create a touch point which is when it fails, it fails consistently, and then you get a global crisis,” he told the panel discussion in London.

Saheed also slammed the inconsistent behaviour of supervisors, which he said was an “absolute fact” in exacerbating the financial crisis.

He argued that the markets have an endogenous way of interacting between one another, which then fell apart when they were hit by the surprise decision to allow Lehman to fail.

This rocked the markets because there had been a precedent to bail out both Bear Stearns and Northern Rock, among others, he said.

“It was a lack of consistency. My belief is that there was the wrong type of regulation in the markets to allow these firms to survive.

“They should’ve allowed them to fail – small failures prevent big ones.”

He argued that the markets have an endogenous way of interacting between one another, which then fell apart when they were hit by the surprise decision to allow Lehman to fail.

This rocked the markets because there had been a precedent to bail out both Bear Stearns and Northern Rock, among others, he said.

“It was a lack of consistency. My belief is that there was the wrong type of regulation in the markets to allow these firms to survive.

“They should’ve allowed them to fail – small failures prevent big ones.”

Leave a Reply

nineteen − sixteen =