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Senior bank executive warns against tougher regulation

A participant walks to the Congress Center to attend the World Economic Forum annual meeting in Davos.

TEXT OF INTERVIEW

JEREMY HOBSON: We'll start in the small town of Davos, Switzerland, where the World Economic Forum is underway. Today a senior executive from Goldman Sachs warned that tougher bank regulation could trigger the next financial crisis.

Let's bring in our European correspondent Stephen Beard for more on this. Stephen, too much regulation? Most of the economists we talk to would say the last financial crisis happened because there wasn't enough regulation.

STEPHEN BEARD: Right, well the argument is that if the regulators crack down too hard on banks they'll push some of the bank's riskier investment banking activities out toward hedge funds. And other bodies that are much less well supervised, much less transparent. So Goldman Sachs says there could be all sorts of shenanigans. This could be the recipe for the next financial crisis.

HOBSON: And how is this going over in Davos?

BEARD: Quite well amid to all these sort of high-priced schmoozing in Davos. Outside the Swiss ski resort I'm not quite so sure. Sean Rickard is a business economics expert at the Cranfield School of Management. He says the big banks are trying to wriggle out of their responsibility for the financial crisis. And he's worried that governments haven't already cracked down much harder on the banks.

SEAN RICKARD: Some of these large banks almost brought the whole system down, and it caused no end of economic hardships for people. And still we're hemming and hawing whether what sort of regulation we ought to put in trade.

These remarks in Davos, Jeremy, you know they are a clear sign of a recovering confidence of the bankers. I mean last year and the year before, bankers were rather subdued in Davos, a bit shamefaced. Now it's clear that with surging profits and bonuses, they've got a bit of a spring in their step again.

HOBSON: My how things are changing. Marketplace's Stephen Beard in London, thank you Stephen.

BEARD: OK Jeremy.

About the author

Stephen Beard is the European bureau chief and provides daily coverage of Europe’s business and economic developments for the entire Marketplace portfolio.

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