Industry believes better regulation could have averted crisis

Norton Rose surveys industry participants about risk and regulation in the crisis

LONDON - Sixty-eight percent of participants in a survey by UK law firm Norton Rose believe better regulation could have prevented the global financial and economic crisis.

In addition, 61% of participants in the survey, entitled "Financial institutions in the future", said global regulation of financial institutions was impractical, while 52% said more punitive regulation would impede financial recovery efforts.

"The issue that must be addressed is whether it was a failure of the regulation itself or the failure to effectively enforce," says James Bateson, partner and head of financial institutions at Norton Rose. "This is key to understanding how regulation should work in the future and ensuring it does not impede the recovery."

On remuneration reform, 83% said they believed an overhaul of compensation structures is required as part of effective risk management. For the role of risk management generally, 68% believe it should be given increased resources, while only 47% thought firms would actually make the necessary investment.

There was widespread approval for state intervention in financial institutions, with 75% saying it has been effective in preventing the worst from happening. However, 84% also believed not enough is being done to cleanse toxic assets from the banking system.

"We are entering a new phase in relation to the global financial crisis," says Bateson. "A more thoughtful approach is emerging as politicians and regulators seek to rebuild the financial system for the future."

Looking ahead, 66% expect financial firms to significantly cut their range of products and services available, supported by 69% who believe the landscape for financial institutions has changed forever.

The survey is the fourth in a series tracking global market sentiment in the crisis and surveyed 197 respondents from financial institutions and corporate entities.