By FINTECH Books Contributor, Remonda Kirketerp-Moller
The financial crisis had its impact on our daily life. Blame was placed on the financial sector, on the government for having little regulation and on the regulators for lacking guidelines on existing regulation. It resulted in more complex regulation in an already regulated sector. Perhaps what is needed is not more regulation, but a standardised and simplified application across the sector, supported by automation through software.
An example; a financial institution is granted a license to offer certain financial services in its home country, and through a passport it can offer those in the rest of Europe. Let’s assume a financial institution is not licensed to offer portfolio management nor on-board retail investors in its home country, but somehow by mistake or lack of oversight by the regulators, the passport granted it those additional rights in the rest of Europe.
The financial institution conducts portfolio management and on-boards retail investors. The investors lose their money – but who is at fault? The financial institution who thought it was entitled to conduct portfolio management and on-board retail investors, or the regulators for granting it a passport with erroneous permissions?
We’ve seen this before, when the paper driving license was replaced by plastic photo card license, the UK DVLA made a mistake and entitled drivers to drive everything which appeared on a license including; motorbikes, trucks etc.,rights which they never had. Assume someone hires a truck without ever having driven a truck and crashes it – but who is at fault? The driver who thought he was entitled to drive the truck or the authority for granting the driver a license to drive the truck?
Is the cause of the problem in the financial sector due to alack of consistency in language used across Europe, a lack of oversight by the regulators, a lack of understanding by the sector, or simply an opportunity of regulatory arbitrage?