How is the Euro Crisis affecting regulation?

No matter the extent of Eurozone activity in the coming months, uncertainty will hit everyone’s finances. But what’s the impact on FS regulation?

As the current Eurozone problems threatened to jeopardise the entire European banking system, it’s clear we’re entering a double dip.

Previous economic recessions (the Great Depression, mid 70s, early 80s, early 90s and late-2000s) lasted approximately two-and-a-half to three years; so there was the assumption that our current decline would follow a similar pattern.

UK economy growth figures issued by the Office for National Statistics in 2008 indicate a downturn in the second quarter of 2008. Four years later and it’s continuing to decline.

The profile of recession and recovery

GDP and the recession

Image: The National Institute of Economic and Social Research

Any doubts that the latest escalation could damage the UK economy were dispelled by a recent IMF report. It warned that the UK could face a “substantial contractionary shock”, setting back progress made towards recovery. It added: “Risks are large and tilted clearly to the downside”. It’s becoming apparent that no matter the extent of Eurozone activity in the coming months, few will escape the fall-out as uncertainty hits everyone’s finances.

For the risk and regulation industry, more and more companies will need to measure risk management and it’s also very likely that further regulation will be a result of the Crisis.

Consequently, while the economy plummets, Financial Services regulation bucks the trend as it is essentially countercyclical.

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