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Credit crisis: not all bad news

Regulators will seek to impose a 'speed limit' on the financial economy as they pay the price of cleaning up after the credit crisis, Medley Global Advisors analyst Paul Silk says.

He predicted regulators would seek to ensure financial institutions increased their buffers in good times to provide for the bad, and to ensure risk managers were rewarded as well as risk takers.

The financial economy would be less complex and less leveraged as a result.

Mr Silk spoke on the international credit crisis at an ASFONZ conference on superannuation savings in Auckland at the end of last week.

He said the 'unprecedented' response from central banks had created a 'stability bridge' to help get the economy through the credit crisis.

"Time is the greatest healer," he said. "Policymakers are going to provide that bridge in time."

But there were still issues remaining to be resolved such as pockets of illiquidity in the markets and fears over the stability of balance sheets.

Slowing real economic growth wasn't as much of a problem for regulators as credit confidence problems, he said.

"This is actually pretty familiar ground for policymakers," he said. "They know what to do."

More by by Fiona Robertson

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