“Financial institution failures are a fact of life and little can be done to stop them”: an evaluation of the recent proposals for reform of financial market regulation in the United States and EuropeExpressO (2008)
AbstractThe analysis of the current financial crisis, and of the measures which are going to be adopted by the United States and the European countries in order to limit its detrimental effects, shows that uncertainty and risk will still dominate the financial markets. The international credit crunch showed, dramatically, the limits of the current regulatory framework, and will lead to a broad revision of the regulatory policies everywhere. The recent international trend toward deregulation, which seemed to be the future path for the worldwide financial sector, has been completely overthrown by the upcoming events. Now, it has to be hoped that the panic of governments to stop the crisis will not lead to an excess of regulation. It is certainly impossible, even for an extremely efficient regulator, to successfully predict every future development, and consequential risk, on the financial markets. However, when a new failure happens, we have a chance to understand something more about the previous mistakes, to concretely improve legal certainty and to make some additional step on the path for reaching an optimal regulatory framework. Occasional regulatory failures should be considered as the inevitable cost of implementing a truly effective system of regulation. It is true that little can be done to stop financial institution failures: regulation and supervision will always have a limited role, and they will never be able to eliminate all possible risks in a financial market which is, necessarily, characterized by risk. However, it can be done, and it has to be done, much more to improve our regulatory and supervisory frameworks, in order to reach an optimal level of regulation which would be mostly effective and, at the same time, cost-efficient.
Publication DateNovember 5, 2008
Citation InformationDomenico Ferrari. "“Financial institution failures are a fact of life and little can be done to stop them”: an evaluation of the recent proposals for reform of financial market regulation in the United States and Europe" ExpressO (2008)
Available at: http://works.bepress.com/domenico_ferrari/1/