Dynamic Regulation of the Financial Services Industry

Wulf A. Kaal

University of St. Thomas, Minnesota - School of Law; European Corporate Governance Institute (ECGI)


Wake Forest Law Review, 2014, Forthcoming
U of St. Thomas (Minnesota) Legal Studies Research Paper No. 13-24

Governance adjustments via stable rules in reaction to financial crises are inevitably followed by relaxation, revision, and retraction. The economic conditions and the corresponding requirements for optimal and stable rules are constantly evolving, suggesting that a different set of rules could be optimal. Despite the risk of future crises, anticipation of future developments and preemption of possible future crises do not play a significant role in the regulatory framework and academic literature. Dynamic elements in financial regulation as a supplemental optimization process for rulemaking could help facilitate rulemaking when it is most needed – ex-ante before crises – to curtail the effects of crises and suboptimal regulatory outcomes – ex-post after crises. By including dynamic elements, the regulatory sine curve of financial regulation could be optimized in relation to the phase-shifted first derivative (cosine curve) that describes common elements of financial crises. Dynamic regulation could help dampen the degree of volatility of both the cosine curve and the regulatory sine curve by creating an anticipatory regulatory response to financial crises.

Number of Pages in PDF File: 31

Keywords: dynamic regulation, new institutional economics, financial regulation, regulation of financial industries, financial crises

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Date posted: June 4, 2013  

Suggested Citation

Kaal , Wulf A., Dynamic Regulation of the Financial Services Industry (2013). Wake Forest Law Review, 2014, Forthcoming; U of St. Thomas (Minnesota) Legal Studies Research Paper No. 13-24. Available at SSRN: http://ssrn.com/abstract=2273857

Contact Information

Wulf A. Kaal (Contact Author)
University of St. Thomas, Minnesota - School of Law ( email )
MSL 400, 1000 La Salle Avenue
Minneapolis, MN Minnesota 55403-2005
United States

European Corporate Governance Institute (ECGI) ( email )
B-1050 Brussels
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