Government-industry forum warns against “regulatory over-reaction”

A government-appointed industry panel has said new rules drafted in response to the financial crisis should be directed at specific problem areas of the financial services community and not at sectors, such as insurance, that have been less-affected by the recent problems. The Financial Services Global Competitiveness Group warned against “regulatory over-reaction” in the non-banking sectors: “Supervisory and regulatory measures taken to respond to the current economic crisis need to distinguish between, and be proportionate to, the experience of different financial services sectors.” It added that: “In the insurance industry in particular, there is less exposure to liquidity risk and large insurers have pointed out that excessive capital requirements are as dangerous and inefficient as inadequate capital requirements.”