DAVOS, Switzerland â€" Rules enacted since the financial crisis have eliminated the need to designate banks as “too big to fail†in a number of countries in the next economic disruption, said Urs Rohner, the chairman of the Swiss bank Credit Suisse.
That said, regulators around the world haven’t taken the next step and agreed to a universal approach on how to handle the next global crisis or even if they’ll honor the others’ solutions, Mr. Rohner said.
Speaking on a panel at the World Economic Forum about banks regaining the public’s trust, Mr. Rohner said he believed that safeguards had been put in place that would protect the financial system and that there would be banks that declare bankruptcy, rather than receiving government support, in the next financial shock.
“People have to be convinced there may be banks that fail. If they fail, they have to be taken out of the system,†Mr. Rohner said. “That is an integral part of rebuilding trust.â€
David Rubenstein, the co-founder of the private equity firm the Carlyle Group, said there was a tendency to overregulate the financial industry in response to a financial downturn, which can restrain business. Regulators have to understand, he said, that they can’t eliminate financial cycles of upturns and downturns.
“There will be something in the cycle we won’t really anticipate,†he said.
J. Adair Turner, the former chairman of Britain’s Financial Services Authority, said that the financial services industry was different from other industries in its relationship with its customers and that it needed to be viewed differently when drafting future policy. In the wake of criticism of its effectiveness, the authority was split last year into two financial regulators.
“The retail customer has almost no ability to test drive their products,†Mr. Turner said. “They are not empowered.â€
