20 September 2007
City Lord Mayor warns against knee-jerk reaction in the
financial crisis blame game
City Lord Mayor John Stuttard at tonight’s (Thursday) City
Banquet at the Mansion House is expected to tell FSA Chairman Sir
Callum McCarthy to stick to his guns and continue with the UK's
risk-based approach to regulation following the global credit
crunch.
"In some countries, politicians are already speaking of further
regulation and even legislation - but it is essential we must
ensure that there isn’t an overreaction to the events of the last
month.
"It was political overreaction in the United States which led to
Congress forcing through the Sarbanes-Oxley legislation. And look
how that hurt New York as well as the companies listed there.
Our Prime Minister, then the Chancellor of the Exchequer, resisted
similar pressures here - and it's one of the best things he
did.
"We must resist the temptation to rush to judgement as to what
went wrong. We must resist the urge to overreact."
The Lord Mayor, who will speak at the City Banquet to 350
business and institutional leaders, is set to tell Sir Callum that
the City believes the FSA's risk-based approach to regulation is
the right one. This requires good corporate governance and the Lord
Mayor has seen during his extensive overseas visits that the UK's
"Combined Code on Corporate Governance" for companies and directors
is envied by regulators and central banks around the world.
The Lord Mayor will say that preserving risk-based regulation is
essential and that failure is mostly a result of the choice of
strategy or management failure rather than poor systems or
fraud.
"This crisis makes it clearer than ever before that
companies need to identify, manage and price risk even more
effectively. This needs to be uppermost in the minds of the
country’s boards of directors. Indeed, when companies fail, it is
more often than not because of their choice of strategy or
because of management failure, rather than because of fraud or poor
systems".
The Lord Mayor, whose professional career was as a partner in
PricewaterhouseCoopers accountants, says that there is disagreement
about the cause of the recent problems, especially among
politicians: "Some say it’s the fault of the rating agencies.
Others say it’s the hedge funds. Unlike after the WorldCom and
Enron scandals, this time it’s not the poor old auditors.
"We now need to time to reflect and to analyse the
problem, to understand precisely what happened in the case of both
Sub-Prime and of Northern Rock. Then, when the dust is settled,
changes may be required. But we must avoid the sudden rush to
judgement”.
Read the
speech
Ends
Notes for editors
Working with the FCO, UKTI and Treasury, the annually elected
Lord Mayor of the City of London works to support all UK-based
financial services, visiting some 25 countries with business
delegations. The Lord Mayor is the head of the City of London
Corporation which provides local government services for the Square
Mile, the financial and commercial heart of Britain and is
committed to maintaining and enhancing the status of the business
City as the world's leading international financial and business
centre through its policies and services. Its responsibilities also
extend far beyond the City boundaries and include management of the
Barbican Centre, Central Criminal Court at the Old Bailey, Epping
Forest, Hampstead Heath, three wholesale food markets, as well as
acting as the London Port Health Authority.
To attend City Banquet press gallery, contact Emma Hutchings on
020 7332 1906