Grande-Bretagne

Rolet’s route from Armageddon

Xavier Rolet, the chief executive of the London Stock Exchange, spoke to INFO Magazine at the inaugural CEO breakfast organised by the French chamber of commerce.

Xavier Rolet, the chief executive of the London Stock Exchange, spoke to INFO Magazine at the inaugural CEO breakfast organised by the French chamber of commerce.

He believes the Armageddon of economic meltdown has probably been avoided. Now is the time to look beyond the crisis itself to the development of our regulatory system and to cooperation between regulators, infrastructure providers and market participants.

info:How do you assess the role of regulators in the crisis?

xavier rolet: The crisis, which was financial in origin, exposed the extent to which regulatory structures, whether in USA, Asia or Europe, have not been aligned.

Indeed, the crisis has started a broader discussion about greater co-operation between national regulators, which is far from over.

How do you assess a new architecture for global regulation?

Governments have to look at ways to intervene and regulate financial companies in a coordinated fashion. We cannot do that if our regulatory structures are different. I think we are beginning to see greater regulatory cooperation across Europe, but also on a more global basis. Capital markets are, after all, global in scope.

Greater understanding of the distinction between the central bank and securities regulators is very important. I am inclined to think that the ultimate regulator of commercial banks, investment banks, insurance and finance companies should be the ultimate balance sheet company, which is the central bank.

Whereas securities regulators know about risk, central banks run their own, often-massive balance sheets, which give them a deeper insight into impending problems and the actions that might contain, limit or avert crisis. More importantly, though, when something does not look quite right, immediate intervention may be necessary. Intervention needs to occur not within two or three weeks; not after going through a parliamentary process, to see what adjustments need to be made.

In short, I believe that the regulatory system needs a central bank that intervenes immediately, using its balance sheet to take over the bank, with full lending authority and the ability to guarantee depositors.

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