Regulation is at crossroads, says Rake

Sir Mike Rake, BT chairman

Two of the UK’s most senior accountants have warned that market turmoil has left regulation at a crossroads, but have urged rulemakers to learn from their experiences and not see sweeping, additional regulation as the answer.

Speaking at last week’s Financial Director Summit, BT chairman Sir Mike Rake said: ‘It’s incredibly important we don’t have a knee-jerk reaction to how we manage events in the future. We must have a principles-based approach to regulation and it must be global.’

Sir Mike said it would be important to ask questions about moral hazard, fair value, risk management and executive remuneration schemes ­ but that the time for ‘intellectual debate’ would come later.

‘It’s absolutely clear regulation is at a crossroads,’ he told delegates. ‘We have to cure the disease and subsequently work out what caused it and prevent it.’

In his first major speech, new PricewaterhouseCoopers UK chairman Ian Powell said dealing with systemic risk in unregulated entities had to be a priority. ‘The real challenge is to improve our regulations and not just add more,’ he told the firm’s building public trust awards this week. ‘Regulatory change is an opportunity to simplify, streamline and look at the real costs and benefits.’

Powell urged further change.

‘We need a better mechanism to flag problems,’ he said. ‘I want the leading accounting firms to be willing to join the top table, with business leaders, with regulators, central bankers, credit rating agencies and others to identify ways of creating an early warning system.’