The financial markets and the real economy are fully intertwined and overregulation is harmful to both, writes Sebastian Bodu (European Parliament’s Magazine, February)

As a member of parliament’s legal affairs committee, I noticed lately an avalanche of legislative initiatives and proposals designed to regulate financial institutions and their auxiliaries. It is good that we will have regulation in a market that was quite unregulated. It is good that we will have common norms and procedures, and common regulatory agencies, which implies standardisation and transparency.

It is also perfectly understandable that Europe must do everything possible to prevent the recurrence of another financial crisis. But it becomes clear that there are situations when excessive regulation may prejudice against people unnecessarily. Sometimes the legislative activity of the EU focuses on those who had no fault, or merely a circumstantial one, in triggering the financial crisis, and who did not receive a penny in aid from the member states’ taxpayers. They became the subject of anti-crisis regulation that goes beyond the limits of good practice and which could easily cause harm by generating unnecessary administrative costs or distortion of competition. Practically, this means a slowdown of the financing, or an appreciation of its costs, which affects both investors and investees. When I refer to investees, I think also of SMEs, which are the most dependent on an alternative financing to banking loans and securitisation.

One example is the alternative investment fund managers report, where a private equity fund or a hedge fund receives a treatment merely close to mutual funds or banks. We are talking here about sophisticated or institutional investors, who do not need protection and cannot be treated as the inexperienced small investors or bank depositors.

Another example is the credit rating agencies report, where a proposal that allows a competing agency to grant ratings for structured financial instruments subject to analysis by another agency, was almost extended to all financial instruments, including harmless plain shares and bonds.

A third example is the short selling report where publication of the net short position in a non-aggregate form may lead to abusive use of the disclosed information.

And finally, we have the example of the audit report, where putting the appointment, remuneration and duration of the auditor in the hands of a third party can distort prices and yet, the competition.

There is another major risk arising from the overregulation of financial institutions, namely that there are large emerging economies, such as BRIC countries which, together with the US, can make the European market a non-competitive place for financial services through their flexible regulatory system, compared to our heavy one. Capital is the easiest thing to move and it is the most sensitive to overregulation, and Europe needs capital and liquid markets.

Independently of our strong attachment to the real economy and how virulently we blame financial institutions and their auxiliaries, we must face the truth. I have seen lately declarations full of affection to production, which are respectively full of reproaches addressed to financial services. Both are faces of the same coin, indissolubly linked to each other. There is no real economy without financing, and there is no financing without the real economy. Any slide-slip leading to unbalances between the two sides is harmful. Passing this crisis, we have seen what it means to have too much debt, too much leverage. I do not wish to see what production would mean without financing. It would mean bankruptcy, job losses, and social crisis.

7 Responses to “The financial markets and the real economy are fully intertwined and overregulation is harmful to both, writes Sebastian Bodu (European Parliament’s Magazine, February)”


  1. 1 vlad Februarie 15, 2011 la 3:49 PM

    Buna Ziua!
    Eu sunt Vlad, unul dintre membri Radio Whisper – un radio antimanele dedicat bloggerilor şi nu numai.
    Am găsit întâmplător blogul tău, am citit câteva articole şi nu am vrut să ies înainte să te felicit – mi-a plăcut mult ce am găsit aici. Am fost atras de subiectele interesante si de originalitatea articolelor. Felicitari ! Noi promovăm la radio diferite articole ale bloggerilor, iar azi am promovat un articol de-al tău; am specificat sursa articolului şi am deschis şi un subiect pe baza acestuia. Dacă doresti, poţi să ne recomanzi orice articol, iar noi îl vom promova.
    Ne-ar face plăcere să ştim că ai dori să ne susţii în acest proiect de radio şi să accepţi o eventuală colaborare.
    M-am gândit aşadar să vin cu o propunere:
    Pe Radio Whisper se difuzează toate genurile de muzică, exceptând manele şi piese necenzurate. Avem şi câteva emisiuni, ştiri etc. Ne-am propus să realizăm un proiect mare, iar pentru asta avem nevoie de susţinerea şi ajutorul tău şi al celorlalţi colegi bloggeri. Dorim să creăm o echipă cât mai complexă de oameni cu un talent aparte şi m-am gândit că poate ai vrea sa ni te alături şi să colaborăm (binenţeles, pe unul dintre domeniile care îţi place). Dorim de asemenea să îţi acordăm un scurt interviu. Pentru noi sunt importante ideile şi modul de a gândi al bloggerilor şi al ascultatorilor noştri.
    Îti multumesc pentru timpul acordat, iar acum îti propun sa adaugi linkul sau bannerul nostru pe blogul tău şi să ne dai add la id-ul asculta.whisper sau un e-mail, tot la asculta.whisper@yahoo.com, pentru a discuta mai multe.

    http://www.radiowhisper.com
    Multumesc,
    Cu stimă Vlad!

  2. 2 naayram Februarie 18, 2011 la 8:46 AM

    Domnule Bodu am dovezi ca termenul Rom exista in Europa de sute de ani.Multi savanti au intrebat pe stramosii mei cum se numesc inca de cand romii au calcat pe aici:
    http://romani-india.blogspot.com/2010/07/prima-atestare-numelui-istoric-rom-la.html

  3. 3 naayram Februarie 18, 2011 la 8:47 AM

    The English Gipsies and Their Language, by Charles G. Leland, [1874], noteaza ca limba si rasa se numeste Rommany.
    http://sacred-texts.com/neu/roma/egl/index.htm

  4. 4 C.Clear Februarie 18, 2011 la 11:57 AM

    Dl Bodu,
    Am dori sa aflam parerea dvs despre frauda flagranta privind utilizarea fondurilor UE.
    Ce credeti, de ce auditorii nu vor sa-si asume aprobarea bilanturilor in ultimii 16 ani ?

    http://riddick2.blogspot.com/2011/02/eu-fraud-continues-unabated-february-17.html#links

    Am pus aceasta intrebare si dlui C Preda si dnei M Macovei si dlui TRU
    Suntem foarte interesati sa ne raspundeti

  5. 5 Sebastian Bodu Februarie 18, 2011 la 7:15 PM

    @C.Clear
    Am citit si eu ieri articolul in FT. Primul lucru care mi-a venit in gand este ca ‘ce bine ca e vorba de Regatul Unit si nu de Romania’. Probabil ca ar trebui mediatizat mult mai mult acest fapt. In presa din RO nu am vazut nimic despre asta (e drept ca m-am uitat doar pe revista presei si nu am luat eu toata presa la frunzarit insa, daca nu era in vista presei, cu siguranta cu nu a fost vreun mare subiect de presa interna)

  6. 6 C.Clear Februarie 18, 2011 la 7:51 PM

    Presa din Ro nu pomeneste deloc despre acest subiect.
    Mai este o postare recenta cu acest subiect :

    http://riddick2.blogspot.com/2011/01/flagrant-eu-corruption-wed-26-jan-2011.html#links

  7. 7 C.Clear Februarie 18, 2011 la 7:56 PM

    Chiar acum vin din oras unde am vazut un panou publicitar de marime de cel putin 2mX2m care pur si simplu m-a socat.Pe fundal negru este scris cu alb :

    „ROMANII N-AU VALOARE”

    ,iar in partea de sus o reclama la site-ul

    http://www.astaeromania.ro.

    Am facut si vreo doua poze

    Cum este posibil asa ceva ?

    Sunt socata !


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