Amid growing calls for better financial supervision, two panelists yesterday advised caution in tightening regulations after a financial crisis, saying it could suffocate innovation.
“This crisis should not be used as an excuse to tighten regulation at the cost of financial innovation,” Kuan Chung-ming (管中閩), a member of Academia Sinica, told a panel discussion in Taipei, which included visiting Nobel laureate in economics Paul Krugman, Taiwan Semiconductor Manufacturing Co (台積電) chairman Morris Chang (張忠謀) and Allianz Global Investors global CEO Udo Frank.
Frank said the financial crisis triggered by subprime loans highlighted the importance of ensuring financial transparency and that investors fully understood the risks they were taking with their investments.
At the same time, financial regulation should be forward-looking, Frank said, and no government should be expected to run banks or businesses — at the risk of lowered productivity — even though they have pumped money to bail out companies and save the economy.
Krugman said financial innovation has become “a slogan,” but few seem to understand what it involves.
While some see financial services such as ATMs or credit cards as financial innovation, recent concern over financial innovation involves more sophisticated products such as derivatives and swaps.
In contrast to Krugman’s pessimistic view of the global economic outlook in the next 10 years, Frank said his company expected Asia to recover ahead of the US, which could show positive growth in the fourth quarter of this year, followed by a rebound in the Europe.
He also warned of a short-term concern — the specter of inflation after governments worldwide pumped massive capital into the markets.
Still, Frank agreed with Krugman that technology would help the world recover and attract new investments, favoring environment-friendly and green-related industries as investment targets.
“Find growth in the new way, rather than in the old way,” he told the seminar.
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