Economists and policymakers ask: Who Regulates the Regulators?
On Thursday 14th April at Jesus College, FLJS brought together a roundtable of expert academics and policymakers to ask, Who Regulates the Regulators? Following the Independent Commission on Banking's recommendations for reform of the financial system, the workshop examined the accountability and liability of regulators in banking and other sectors, and featured a panel including Baroness Deech, Chair of the Bar Standards Board, and Lord Bradshaw, the Liberal Democrat peer.
"transborder crises with a high component of systemic domino effects are confronting regulators increasingly frequently
The economist Chris Decker's analysis focused more specifically on the UK, attributing the current glut of regulatory reforms not only to the Conservative pre-election manifesto to excise policymaking functions from regulators, but also to the age of many regulatory bodies that were established twenty years ago in the economic liberalisation of the Thatcher years. He identified a possible crisis of identity in some regulators, who are unclear as to whether they should act as arbiter, tribunal, or consumer champion, and set out an assessment of the purposes, organisation, and supervision of regulatory authorities.
"Dr Decker identified systemic problems such as the imprecise and potentially competing objectives of some regulators; Capture Theory, whereby regulators become beholden to special interest groups; and, most significantly, Confirmation Bias
In a wide-ranging presentation, Dr Decker identified systemic problems such as the broad, imprecise, and potentially conflicting objectives of some regulators; capture theory, whereby regulators become beholden to special interest groups; and, most significantly, the potential for confirmation bias. This latter theory describes an approach to information gathering which inappropriately bolsters a particular hypothesis or beliefs in a context of uncertainty, and was used by Dr Decker to speculate as whether this may have been one of the reasons why banking regulators may not have xplored the possibility that credit might dry up prior to the economic crisis of 2007. He argued for a more 'sympathetic' approach to regulatory decision-making, one that offers more engagement with hypothetical scenarios and possible outcomes, to forestall potential problems before they emerge.
Following a review of the existing accountability mechanisms in place, Dr Decker addressed the challenging question of exactly what recourse there is when a regulator makes a mistake. Citing the interim ICB Report, he noted that regulatory frameworks can be subject to independent scrutiny and review, before looking at recent measures to break up or amalgamate failing regulators, such as the reforms to split up the Financial Services Authority. Lastly, Dr Decker turned to the measure of judicial review, which, he concluded, may prove less than effective when the decision is sent back to the regulatory body, and invariably, the same regulatory remedy applies.