FT prizewinner calls for global regulator

A consultant who focuses on employment opportunities for marginalised communities has won the fourth annual Financial Times research prize with an essay calling for a single regulator to oversee the world's biggest banks.

In her essay entitled, "International Financial Supervisory Convergence - Building the architecture to win the next war and not to fight the battle already lost", Peggy Carballo-Smith said global systemically important financial institutions should also be required to contribute to a single worldwide insurance fund that could be used to stabilise the financial markets in times of crisis.

"Banks need not be dangerous. Indeed, a thriving global economy needs strong global banks, regulated by empowered and accountable international regulators...We need to be radical. The times demand it," Ms Carballo-Smith wrote.

Lionel Barber, editor of the FT, said, "The annual FT research prize has become a leader in its field and this year we have an outstanding winner. Penny Carballo-Smith's essay on the need for unified regulation of global systemically important financial institutions addresses one of the most pressing policy issues of the day in the wake of the banking crisis," said

This year's contest called for entrants to answer the question: "International financial supervisory convergence: how much should there be? How best to assess the appropriate level of cross-border supervision and enforcement?" The contest attracted 21 essays, far fewer than in years past. Organisers said they had selected the topic in part because the selection of existing literature on the subject was relatively slim. Some would-be entrants may have been deterred by the specialised question.

Ms Carballo-Smith argued that the leaders of the Group of 20 leading economies should appoint representatives to single body that would supervise the biggest banks based on seven factors, including their capital ratios, conduct toward customers, resistence to corruption and social responsibility to the broader society.

Trained in the West Indies as a lawyer, Ms Carballo-Smith moved to the UK where she attended the London School of Economics and worked for KPMG for nine years. She has now struck out on her own as a governance consultant who works with charities and think tanks. She also heads Future Think, a social enterprise group that identifies potential jobs and matches them with people who have less access to employment information.

She said she entered the contest on the urging of her husband, a banker. "He said to me I should enter because I am not a banker and fresh perspectives and out of the box thinking are needed," she said. "I am completely overjoyed" to have won.

While her work with KPMG exposed her to the finance sector, she did fresh research about systemically important banks in order to write the prize-winning essay, which garnered a $7,500 award. No runners up prizes were awarded this year.

The International Centre for Financial Regulation, which co-sponsored the prize in prior years, was put into administration late last year. The centre's board said a member of the management had been suspended after a "substantial" sum of money "appeared to have been removed from the organisation's bank accounts" without the permission of the centre's board. A man was been arrested and bailed late last year in connection with a police inquiry into the matter. No one has been charged with wrongdoing.

Past winners of the prize have included academics, government advisors and a student.

Last year, Connel Fullenkamp, a Duke University economics professor and Sunil Sharma, the head of an International Monetary Fund training institute, walked off with top honors for a paper arguing that regulators should be financially independent and well trained. The essay also proposed tying part of regulators' pay to the survival of the companies they supervise.

The 2009 winner Nana Esi Atsem called on banks to make wider use of contingent capital - debt that converts to equity in a crisis - a proposal that has been taken up by banks and regulators in Switzerland and the UK. The 2010 winner Hyun Song Shin proposed using taxes to to counteract the credit cycle and deflate dangerous asset bubbles.

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