Thursday, July 16, 2009
China on Bank Regulation
"First of all, the firewall between capital and banking markets was eroded by unsound financial innovations. Second, macro-prudential regulation was neglected. Third, financial institutions had too much leverage and were too opaque. Fourth, incentives for staff at fincancial institutions were driven by short-term gains, rather than long-term benefits. Fifth, the bail-out put the cart before the horse by pumping in capital and liquidity before cleaning up balance sheets. ... We believe banks are deeply rooted in the real economy and while the financial sector can temporarily outpace the real economy, this cannot continue forever", Liu Minghang (LM) at the FT, 29 June 2009.
LM is chairman of China's Banking Regulatory Commission. I wonder if LM wants to replacce Tim Geithner?