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http://ssrn.com/abstract=1132665
 
 

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Financial Regulation, Behavioural Finance, and the Global Credit Crisis: In Search of a New Regulatory Model


Emilios Avgouleas


University of Edinburgh - School of Law

September 3, 2008


Abstract:     
The global credit crisis has led to systemic instability, the accrual of massive losses in major US and European banks, and created significant public costs. It has also shown that the current model of national and international banking regulation is inadequate. This paper attempts to answer questions relating to the future shape of national and international financial regulation in light of lessons drawn from this crisis. While most policy proposals for the overhaul of the US, UK, and international financial regulation predominantly deal with issues relating to the containment of a systemic crisis, the paper offers more radical solutions, which deal with the prevention of such a crisis. In this mode, it suggests a pluralistic regime for the licensing and supervision of banking institutions at a domestic level and the establishment of a global multi-tiered licensing and supervisory scheme for transnational investment funds with systemic importance. The supervision of investment funds' compliance with the suggested prudential regime should be assigned to an independent global regulatory authority, which would utilize the market research and surveillance infrastructure of the IMF. The findings of behavioural finance provide solid support for the suggested reforms.

Number of Pages in PDF File: 58

Keywords: Global Credit Crisis, Behavioural Finance, Banks, Banking Regulation, Bear Sterns, Northern Rock, Hedge Funds, International Financial Regulation, Securitisations, CDOs, Systemic Risk

JEL Classification: G15, G18, G21, G28

working papers series





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Date posted: May 13, 2008 ; Last revised: March 30, 2009

Suggested Citation

Avgouleas, Emilios, Financial Regulation, Behavioural Finance, and the Global Credit Crisis: In Search of a New Regulatory Model (September 3, 2008). Available at SSRN: http://ssrn.com/abstract=1132665 or http://dx.doi.org/10.2139/ssrn.1132665

Contact Information

Emilios Avgouleas (Contact Author)
University of Edinburgh - School of Law ( email )
Old College
South Bridge
Edinburgh, Scotland EH8 9JY
United Kingdom
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