The sheer amount of financial regulation – the so-called Tower of Basel – leaves too much room for unintended consequence, claims a team from London-based magic circle law firm Allen & Overy.

Pages and pages

With the Dodd-Frank legislation in the US running to some 30,000 pages and EU regulations adding around another 60,000 pages, the London-law firm speculates that Europe’s top 350 banks will need to hire more than 70,000 extra compliance specialists.
The lawyers also maintain that the regulation glut will lead the financial sector too far down the ‘stability path’.
The A&O lawyers suggest that national regulators are being given too much room to interpret the policy framework and shape it to suit their own markets, possibly leading to years of arguments before any policies are implemented.
Their key research findings show that the lawyers say there is a high chance of an increase in uncertainty in financial markets, at exactly the time when greater certainty is needed.

Crucial choice

‘The volume of legislation seems disproportionately large and the scope for differential national implementation and extraterritoriality is immense, says the report. ‘Policy makers face a crucial choice here: making the financial system so safe in the name of financial stability that it is unworkable and creates paralysis, or accepting that a functioning financial system carries a degree of risk and should be promoted as such.’
Commenting on the research, Alistair Asher, partner and director of the A&O’s financial institutions department, said: ‘Politicians must consider the measures they have to release credit offers, obtained either from traditional or alternative sources. If they can’t adopt a radical approach to this issue, businesses will continue to have trouble in obtaining finance, which could have serious wider consequences in relation to general economic growth.’