Increasing global financial regulations hinder renormalising of credit channels but are necessary to develop the market, according to PIMCO.
PIMCO managing director and portfolio manager Saumil Parikh said most major economies worldwide are at an important crossroads in terms of policy.
Developed countries, such as the US, Europe and Japan, are struggling to find the right fiscal and monetary policy mix, whilst developing economies are not fairing much better, he said.
“Capital account regulations remain very high, with developing countries increasingly resorting to new forms of control to combat ultra-loose monetary policies from developed country central banks,” Mr Parikh said.
He also explained that although environmental regulations are not a headwind to cyclical growth yet, it is likely to become a reality in the not-so-distant future.
“2013 will be a year of policy change. Global policy makers will face both domestic and international pressures to enact structural changes across all the major economies we cover,” Mr Parikh said.
“At stake is the continuation of current growth trends, and the successful handoff of public policy-driven growth to private sector growth, prior to the exhaustion of balance sheets that have supported the global economy through this ‘new normal’ recovery from crisis,” he said.
Meanwhile, on 31 December, reforms mirroring Australia’s Future of Financial Advice (FOFA) legislation took effect in the UK amid concerns the new regulations may lead to job cuts in the financial advice industry.
The reforms seek to remedy what the UK’s Financial Services Authority perceives as a lack of transparency in the UK financial advice sector, including new professional standards requirements such as compliance with a new industry code of ethics.
But in response to the move in the UK, the Australian Financial Services Council (FSC) reiterated broad opposition to regulation of the financial services sector.
“Over-regulation is one of the key concerns of CEOs in the financial services industry in Australia,” an FSC spokesperson told InvestorDaily at the time.
“In many cases regulation does not pass a simple cost-benefit test and is crippling productivity growth.”
