European Commissioner Charlie McCreevy has lashed banking and financial regulators, saying the system had 'aided and abetted' the creation of a super-bubble.
Speaking to hedge fund managers in Brussels, Mr McCreevy said the regulatory and supervisory systems in Europe and the US had tolerated relaxed lending practices and the accumulation of unsustainable debt by households, individuals and companies.
While he said regulation was not the root cause of the problem, it did allow the emergence of business models based on what he called 'flimsy and highly leveraged foundations'.
He also said the regulatory regime exacerbated the depth of the crisis because it had the effect of putting more money into an already booming economy.
But he said Europe would not regulate its way out of the crisis. Nevertheless, he said, there would have to be additional regulation, adding that regulation of hedge funds and private equity was inevitable.
Mr McCreevy said the commission would soon be proposing regulations on executive pay in the banking and financial industries, to more closely align executive pay with the long-term income of such companies, rather than rewarding short-term gain.
