London: Business leaders around the world back greater regulation in response to the global financial crisis, a survey showed on Wednesday, with support strongest for curbs on credit rating firms, hedge funds and structured finance.
Responses from more than 700 chief executives, chairmen, partners and directors across Asia, Europe and the US were received between 4 November and 6 November.
The survey, conducted by international law firm Allen and Overy, was timed ahead of this weekend’s Washington, DC summit on the deepening crisis between the leaders of the Group of Twenty (G-20) leading world economies.
More than three-quarters of those polled agreed that more regulation of credit rating agencies was necessary, while two-thirds supported greater regulation of hedge funds.
Some 67% said more complex instruments used in global finance—such as securitizations and other forms of structured credit—required better regulation, more restrictions and more disclosure.
Even more, 77%, said derivative products that provided exposure to shares should be made more transparent.
However, more than two-thirds of executives surveyed did not support bans on short-selling, a practice typically employed by hedge funds and involving the sale of borrowed shares or securities in the hope of repaying the loan with cheaper stock.
Many authorities in Europe and the US have prohibited short-selling of financial stocks in particular during the worst moments of the recent crisis.
Senior partners at Allen and Overy said the survey showed sometimes conflicting and confused views on what new regulation was needed and there were some regional disparities.
But they said it was important that G-20 leaders listened to business rather than regulating across the board or raising barriers such as currency and capital controls.
“We fear that, in the absence of an informed debate that fully engages market participants, we could face a knee-jerk political reaction that is focused on punishing the markets instead of helping them to function efficiently and securely,” said Wim Dejonghe, Allen and Overy managing partner.
The survey showed no consensus for a global financial regulator to bring all these changes into line.
While a majority of US and UK respondents—56% and 55%, respectively—were against a global regulator, some 58% of continental European business leaders backed its creation. Asia was split.
There was overwhelming support for a consolidation of domestic regulators, however, and almost 80% of all surveyed backed local restructuring of existing national frameworks.
That came in tandem with calls for government agencies to be funded with better pay and more high quality staff.