The fear of another financial crisis will drive regulatory thinking for the next two decades as the philosophy of light-touch regulation disappears, according to Royal London Asset Management (RLAM).
Chief executive officer Robert Talbut, speaking at a seminar in London today, said the likes of Solvency II, MiFID and the UK's new twin towers regulatory structure are all symptomatic of a more proactive and risk-averse regulatory approach which is here to stay.
"Regulators and governments are saying we must not return to the crisis environment again and this will frame regulatory thinking for the next 20 years," he said. "The idea there should be light-touch regulation has disappeared for an extremely long time."
He added current regulatory thinking is driven by a desire to "cure the problems of the previous financial crisis" and create a smaller and safer financial system which will ultimately impact attitudes to product design and market intrusion.
"I think 2008 was a watershed moment - now regulators and politicians are involved in financial outcomes and driving outcomes."
Talbut (pictured) said the shift from principles-based regulation to a focus on "adjusting" market behaviour will continue.
"In the next few years there will be more regulations making trading more difficult with a regulatory thrust to disincentivise activities considered bad."
Elsewhere, he said the risk-on/risk-off investment "tug of war" shows no sign of abating amid market uncertainty.
"The industry is faced with more volatile and tougher times than at any stage over the last 30 years."
He added the situation in Europe is "completely unsustainable" and only "fundamental changes" in policy can save the euro.
Meanwhile, RLAM economist Ian Kernohan predicted inflation will fall to about 2.5% to 3% this year before rising in the medium to long-term.
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