The global financial crisis has ripped holes in the much-vaunted "principles-based" approach to regulation, leaving regulators and policymakers hopelessly exposed during the re-regulation debate, according to a leading academic. Professor Justin O'Brien, of the Queensland University of Technology, said that the events of the past 18 months have been nothing less than a crisis for the dominant regulatory paradigm of our era. Just as the collapse of Enron in late 2001 exposed the shortcomings of a purely rules-based approach to regulation, O'Brien believes that the crisis has critically undermined confidence in its successor, the principles-based model of regulation.
O'Brien, who recently wrote a book on the crisis entitled "Engineering a Financial Bloodbath", is concerned that if these shortcomings are not acknowledged regulators will simply oversee a march toward the next meltdown. He also warned that the issue was highly politicised; many regulators, for example, are reluctant to
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