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Helping the Markets Weather the Credit Crunch    
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By Stephen Kiely, ccrmagazine.co.uk

A worldwide targeted review of financial regulation will help the markets weather the credit crunch, according to a paper recently published.

The Credit Crunch: Implications and Changes Required is a position paper prepared by the British Bankers’ Association (BBA) for its members and calls for immediate reviews of regulation in the UK and internationally, including the regulatory treatment of financial firms’ cashflow needs and risk practices (so-called liquidity risk management); complex credit products and off-balance sheet vehicles (such as conduits and Special-purpose Investment Vehicles or SIVs); accounting and valuation practices for complex financial products; credit rating agencies; and deposit protection arrangements.

Angela Knight CBE, chief executive of the BBA, said: “However uncomfortable it may be, we must tackle the question we are increasingly hearing from the international community about the credit crunch and the Northern Rock affair: ‘Did it really have to be done like this?’

“No single factor was responsible for the customer panic that we saw last month. But the architects of the UK system of tripartite regulation have questions to answer and the international financial community has clear lessons it can learn from the mistakes that were made. This paper is a contribution to both of these processes.”

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