Some Thoughts on Risk and Regulation

With reference to recent events, the Paper will present some theories on why human beings may have a warped approach to risk in general and comments on some features of the financial services sector which might serve to magnify this. Possible responses, including regulatory responses, are then reviewed. In relation to regulation, topics coverered include: (i) the complex task facing regulators in the areas of public comment and transparency, (ii) possible objectives or regulation in financial services, (iii) 'light touch' and 'heavy touch' regulation, and (iv) what might reasonably be expected from regulatory bodies.