Four Challenges to Financial Regulatory Reform

Villanova Law Review, Vol. 55, p. 101

28 Pages Posted: 13 Dec 2009 Last revised: 16 Jul 2010

See all articles by Eric J. Pan

Eric J. Pan

Columbia University - Center for Law and Economic Studies

Date Written: December 10, 2009

Abstract

The recent global financial crisis represented a failure of regulation to the extent that regulatory responses and strategies existed, but were not deployed, to prevent or mitigate the factors that contributed to the crisis. Recognizing the failure of regulation in preventing the recent financial crisis and the need to pursue more effective regulatory strategies, policymakers in the United Kingdom, United States and European Union set forth concurrent proposals for substantial reform of their respective regulatory systems. The reforms emphasized the reorganization of regulatory agencies and expansion of powers of surviving agencies. The proposals, however, differed significantly from each other.

Successful financial regulatory reform must address four challenges. First, how should regulatory systems be structured? Second, should there be a separation of prudential supervision and consumer protection regulation? Third, which entity should be responsible for monitoring and managing systemic risk and what should be its powers? Fourth, how should cross-border financial services and transactions be supervised and regulated?

The paper considers the four challenges to financial regulatory reform and evaluates whether the UK, US and EU reform proposals succeeded in addressing the challenges.Given their weaknesses, the paper concludes that the reform proposals do not go far enough to prevent future regulatory failures.

Keywords: financial regulation, financial institutions, regulatory systems, prudential regulation, regulatory reform, financial crisis

Suggested Citation

Pan, Eric J., Four Challenges to Financial Regulatory Reform (December 10, 2009). Villanova Law Review, Vol. 55, p. 101, Available at SSRN: https://ssrn.com/abstract=1521504 or http://dx.doi.org/10.2139/ssrn.1521504

Eric J. Pan (Contact Author)

Columbia University - Center for Law and Economic Studies ( email )

435 W. 116th Street, Box A-22A
New York, NY 10027
United States

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