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21 February 2005

CSFI: Regulatory overkill seen as main risk facing banks

The Centre for the Study of Financial Innovation (CSFI), the independent City of London think tank, released a report stating that regulatory overkill saps bank resources, reduces risk diversification and creates a false sense of security. The rise in regulation has become the greatest risk facing the banking sector according to the latest ‘Banana Skins’ survey conducted by the CSFI and sponsored by PricewaterhouseCoopers.

This finding is based on responses from 440 bankers and close observers of the banking scene in 54 countries, but the threat is perceived to be particularly strong in the EU and North America. Many senior bankers described regulation as “out of control”.

John Hitchins, UK Banking Leader at PricewaterhouseCoopers, said: 'Bankers have thrown down a challenge against too much prescriptive regulation. While few challenge the objectives of regulators, there is a clear need for further debate on how these are implemented'. Other high level risks include credit risk (2nd), corporate governance risk (3rd)and derivatives (4th).

David Lascelles, the CSFI’s co-director who ran the survey, said: “It is ironical that people now see the greatest dangers in regulation when new types of risk are emerging all the time: hedge funds, derivatives, electronic fraud. Banks should not be distracted from these risks by box-ticking and form-filling”.

Press release

© Graham Bishop

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