According to the then Governor of the Banca d’Italia, ‘The Parmalat affair is the outcome of the repeated perpetration of criminal acts in the management of the company. The circumstances surrounding the case once again show that failure to observe the law and the lack of a firm ethical base for the conduct of economic agents can be a serious impediment to the functioning of the economic and financial system’

(Fazio, 2004). Discuss the problem facing regulators, in the light of:

(a) the importance of consumer confidence to financial markets, but

(b) the concern of financial markets regarding overzealous and costly regulation.