Regulators and banks 'helped create super-bubble'
Charlie McCreevy, EU Commissioner for Internal Markets & Services speaking at a conference in Brussels, Belgium, yesterday
Friday February 27 2009
EU internal markets commissioner Charlie McCreevy has strongly criticised banks and regulatory authorities, saying they had "aided and abetted" the creation of a super-bubble.
He claimed the banks "exacerbated" the current financial crisis through lax lending practices and flimsy business models.
In an address to hedge fund managers in Brussels yesterday, Mr McCreevy said the financial system failed to stem the flow of leverage, tolerated relaxed lending practices and "the accumulation of unsustainable debt by households, individuals and companies".
While he said regulation was not the root cause of the problem, it did allow the emergence of business models based on what he called, "flimsy and highly leveraged foundations". He said there would have to be additional regulation in the future, adding that regulation of hedge funds and private equity was inevitable.
"Closer direct regulatory and supervisory oversight of hedge funds and private equity is inevitable. The two sectors should be treated differently," Mr McCreevy said.
Mr McCreevy said the commission would soon be proposing regulations on executive pay in the banking and financial industries, to more closely align executive pay with the long-term income of such companies, rather than rewarding short-term gain.
Next week, the European Commission will present outline proposals on a range of measures to tackle flaws uncovered in regulation by the worst financial crisis in decades.
