Regulation of financial services needs to be measured and appropriate to enable capital markets to be competitive and efficient, the Finance Dublin annual conference was told yesterday.

Addressing the conference on The Future of the Transatlantic Capital Market - Regulation, Risk, Governance, European internal market commissioner Charlie McCreevy said flexible and adaptable regulation was necessary.

"We need a balance," he said. "A balance between a regulatory framework that guides peoples' actions, and economic freedom that allows them to innovate, experiment and take risk. And we should make sure that the regulatory tools we apply are measured and appropriate."

Mr McCreevy said states could not, and should not, legislate risk away. Instead, they should manage it. "If people believe that regulation is insulating them from risk, then instead of doing what they believe is right or sensible, they will take no chances."

Commissioner Paul Atkins of the US Securities and Exchange Commission (SEC) said it was undertaking a review of its regulatory framework. Three policy groups were established to issue reports on the reasons why the US capital markets had become less competitive, he said.

"A constant theme is that excessive, overlapping and unnecessary regulation in the US is a major reason for our loss of market share in the global capital markets," he told delegates.

Each report recommended quick and substantial changes to the rules and guidance implementing section 404 of the Sarbanes-Oxley Act; co-ordinated regulatory processes that require meaningful cost analyses; and involvement by the president's working group to provide transparency and predictability in the enforcement process.

Both commissioners agreed that markets could not act without considering what other countries were doing. "We need each other's co-operation and assistance to fight fraud, manage risk, and maintain low costs and efficiency for the ultimate benefit of investors, workers and taxpayers," said Mr Atkins.