And who will do the regulating?

If understanding what all those smart people who work for banks and earn big bonuses are up to was easy, then the world would probably not have had this financial crisis. Some bank management would have realised what risks were being taken with the exotic devices dreamed up by their genius underlings and, if they didn't, then surely one of the world's financial regulators would have. That neither group did so illustrates the complexity of the arrangements entered into in the pursuit of a highly leveraged profit to maximise the bonus.
The International Monetary Fund seemed to recognise the difficulty in regulating such dealings in the report it submitted to the Australian Government back in 2006. This Financial System Stability Assessment said that APRA and ASIC, while still relatively young Commonwealth agencies, awere making good progress in building their staffs and putting in place systems and policies. That to me was polite international bureaucratic speak for saying that there was still some way to go!
"It will be important," said the IMF reviewers, "that they maintain this momentum and have the necessary resources and compensation flexibility to attract and retain experienced staff with a solid understanding of the financial sector and the risks inherent in the large institutions."
It certainly makes you wonder whether the regulators are equipped to handle another batch of institutions to supervise as Prime Minister Kevin Rudd has now offered those currently outside the scope of its financial guarantees to depositors.

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