Today’s Business Standard carries an editorial that deals with possible regulatory responses to financial markets crises, a theme also addressed in a recent post on this blog. Here is an excerpt from the editorial:
“The history of financial regulation shows such regulation is rooted in crisis. Significant regulatory change usually takes place in response to the perceived inability of the previous regime to anticipate and prevent a crisis. This is not in and of itself a negative attribute. Any attempt to envisage every possible scenario and build in regulatory safeguards in anticipation can completely stifle innovation. However, it is critical that the right lessons are learned from every crisis. The true test of a regulatory system lies in its ability to avoid the same crisis a second time around.”
The entire editorial is worth reading, and is not very long (only 4 paragraphs!).