Financial Regulation: Why, How and Where Now?

by Goodhart; Charles

• ISBN13: 9780415185042
• ISBN10: 0415185041
• Edition: 1st
• Format: Hardcover
• Copyright: 1998-06-08
• Publisher: Routledge

Summary

Published in association with the Bank of England, this volume presents an important analysis of the nature, objectives and costs of financial regulation around the world.

Table of Contents

List of figures	ix	(1)
List of tables	x	(1)
Notes on authors	xi	(2)
Foreword by Eddie George	xiii	(3)
Acknowledgements	xvi	(1)
Introduction	xvii
1 The rationale for regulation	1	(37)
A. The scale of the problem
B. The case for external regulation, and the need to make such a case
(i) Protection against monopolies
(ii) Client protection
(iii) Systemic issues
C. Economies of scale in monitoring
D. Why banks are special
E. Do securities firms or insurance companies pose any systemic dangers?
F. Conclusion
Appendix
2 Barings and the need to recast the form of external regulation in developed countries	38	(6)
3 Incentive structures for financial regulation	44	(17)
A. Principal-agent relations and contracts between the regulators and the regulated
(i) Adverse selection and moral hazard
(ii) Pay structures, time-inconsistency and internal controls
(iii) Signalling, delegation and incentive contracts
B. Forbearance and pre-commitment on closure
(i) How serious is regulatory forbearance?
(ii) Accountability
(iii) Prompt corrective action provisions
(iv) Size and `too big to fail'
(v) Idiosyncratic v. systemic shocks and incentives for herding
C. Conclusions
4 Proportionality	61	(12)
A. A tendency towards overregulation?
(i) Is regulation treated as a free good?
(ii) Regulatory arbitrage as a counterbalance
B. Cost-benefit analysis
C. Accountability
D. Quasi-market mechanisms?
5 The new techniques for risk management	73	(25)
A. Value-at-risk models for market risk
(i) The basic techniques
(ii) A critical evaluation
B. Pre-commitment in market risk regulation
(i) Incentives for banks
(ii) Incentives for the regulators
C. Credit derivatives and recent advances in credit risk management
(i) The special features of credit risk and its management
(ii) Credit scoring and the `post-millennium project'
(iii) Credit derivatives -- a new beast to be tamed?
6 Regulation in developing countries	98	(18)
A. Introduction
B. Some special problems in developing countries
(i) The banking system
(ii) The economic infrastructure
C. The role of the regulator
D. Problems with the application of developed economy supervisory tools and methods to emerging financial markets
E. Effective regulatory systems in emerging financial markets: dealing with the transition
F. The sequencing of liberalisation
Appendix
7 Managing financial crises in industrial and developing countries	116	(26)
A. Introduction
B. Principles and constraints in managing financial crises
(i) Three basic principles for managing banking crises
(ii) Differences in constraints between developed and developing countries
(iii) A principle for managing non-bank financial crises
C. Lessons from bank restructuring in the United States, Japan and the Nordic countries
(i) The Savings and Loan crisis in the United States
(ii) The banking crisis in Japan
(iii) The Nordic countries
D. Lessons from bank restructuring in developing countries
(i) Crisis resolution in the 1980s: the cases of Argentina and Chile
(ii) Restructuring the Mexican banking system in the mid-1990s
E. Preserving the value of financial assets outside the banking system
F. Concluding remarks
8 The institutional structure of financial regulation	142	(47)
A. Introduction
(i) Alternative approaches
(ii) No Single model
(iii) Is institutional structure a significant issue?
(iv) Appendix to Section A: financial conglomerates
B. Institutional structure of regulation
(i) The criteria for institutional structure
(ii) Single v. multiple agencies: the case for a mega regulator
(iii) The case against a mega regulator
(iv) Alternative divisions
C. Institutional structure based on the objectives of regulation
(i) Twin Peaks
(ii) An alternative system
(iii) A regulatory matrix
(iv) The role of the central bank
D. The international dimension
(i) Hazards in competitive neutrality
(ii) Alternative forms of international collaboration
(iii) Suggested guidelines
E. Assessment
Appendix: The structure of regulatory agencies in key countries
9 Summary of policy conclusions	189	(14)
A. Main analytical themes
B. Policy conclusions
(i) The basis of regulation
(ii) The general approach: incentive structures
(iii) Policy differentiation
(iv) Issues in developing countries
(v) Management of financial crises
(vi) The international dimension to regulation
C. Concluding note
Appendix: Central Bank Governors' Symposium participants	203	(3)
Notes	206	(25)
Bibliography	231	(11)
Index	242