Finance: Why bother regulating financial institutions?

Nikitin

What's the point? Recently the EU tried to regulate various kinds of speculations by taxing - but the most damaging speculations like CDS, currency futures etc can be done as easily in New York as in Paris.

So why would the EU bother doing this without international support from major economies like the US?`

I've only got a casual interest in finance, so please explain to me in a layman's terms.

John Creighto

It can only be done over seas if they move the money to an overseas institution such as a subsidiary. If the rules also penalize repurchase agreements (and other ways of moving money out of the country) and have adequate rules for properly valuing foreign assets on their balance sheets then much of this concern can be mitigated. As a side note, in some areas, London had less strict regulations then in New York.

Nikitin

Well, then Wall street would take over the markets while the Euro financial companies die. Hardly beneficiary to the EU anyway, right?

Ryan_m_b

It is my (admittedly limited) understanding that this is why Prime Minister Cameron refused to sign up the UK to the new reforms. Reason being that a hefty portion of the UK's economy is generated by The City and if regulations such as a transaction tax were imposed the money generating industry would migrate.

Nikitin

Indeed, it was quite selfish of Cameron to refuse to cooperate. I mean, the ones who would be hurt by the taxes would mostly be speculators, not real investors and banks lending money away. They aren't good for the UKs economy in the long term.

Anyway are there any financial experts here who might answer my question in the OP?

Maybe the EU was planning on a cooperation with the other major economies, like the US, when it came to regulating the financial sector?

MaxManus

I believe the US should have natioalized the banks during the financial crisis and then just sold the companies later when they could get an OK price. That's the only way the stockholders will be on the watch for insane specualtions. The employee with stock options will also behave bether.

Antiphon

The bankruptcy system works just fine. There's no need to alter it.

In bankruptcy the federal government becomes trustee to the assets of the bankrupt firm.