Review of Open Lecture with Avinash Persaud
"What has caused the financial crisis and what hasn't?"
September 8
12-1:30 pm
 Avinash Persaud |
“If there were no mortgage fraud, no tax secrecy, and no conflicts of interest, a crisis would still have occurred."
The current crisis is not the first international banking crisis the world has seen. Given our historical experience, crashes follow booms. In the boom almost all financial institutions look good, and in the bust almost all look bad. But if crises follow booms, banning the products, players, and jurisdictions that were merely the symptoms will do little to prevent the next one.
There is, however, a widely held view that the current financial crisis resulted from an insufficient reach of regulation and that the solution is to take existing regulation and spread it without gaps across institutions and jurisdictions. This belief would be a mistake for several reasons - the main one pointing out that at the heart of the crisis actually lay highly regulated institutions: Northern Rock, IKB, Fortis, Royal Bank of Scotland, UBS, Citigroup – to name only some. Even the special investment vehicles were not secret; supervisors certainly had the discretion to look at how regulated institutions were managing risks and to respond.
Therefore, Avinash D. Persaud argues, if crises keep repeating themselves, it seems reasonable for policy makers to carefully consider what they are doing and not just react to the specific features of a current situation. Since we are dealing with systemic risks, he maintains, we require a different set of tools than micro-focused reform ideas which currently dominate the public. The solution to the crisis, according to Persaud, is not more regulation but better regulation – in particular, more macro-prudential regulation.
About Avinash D. Persaud
Professor Avinash Persaud’s career spans finance, academia and public policy. He is currently Chairman of Intelligence Capital Limited, a financial advisory boutique. Previously, Persaud was Investment Director, GAM, (2003-2005); managing director, State Street Corporation (1999-2003); global head, currency and commodity research, J. P. Morgan (1993-1999) and Director, fixed income research, UBS, (1989-1993). Persaud is Chairman, Warwick Commission; Member, UN Commission of Experts and Member, Pew Task Force on financial regulation. He is Co-Chair, OECD Emerging Markets Network (2006-) and Deputy Chair, Overseas Development Institute (2006-). He was elected director of the 65,000-strong Global Association of Risk Professionals (2002-).
About the ESMT Open Lectures
Starting in Autumn 2009 ESMT will continue its series of lectures focusing on questions of current intellectual concern. The lectures showcase speakers, who through their achievements and expertise are recognized leaders in their fields and have pushed the frontiers of public discussion. The lectures cover a wide spectrum of fields ranging from business, economics, politics, and philosophy to the arts. While speakers are authorities in their particular area, their insights have broad relevance and wide-ranging applications. The ESMT Open Lectures provide a forum in which their ideas can be communicated to a wider audience.
ESMT European School of