Does Britain Need a Financial Regulator?

Institute of Economic Affairs Monographs, 2010

Hobart Paper Working Paper No. 169

89 Pages Posted: 3 Dec 2010

See all articles by Philip Booth

Philip Booth

City University London - Sir John Cass Business School

Terry Arthur

Institute of Economic Affairs (IEA)

Date Written: August 4, 2010

Abstract

Only a generation ago, UK investment markets were regulated by self-governing exchanges. Though independent exchanges still exist, investment markets have become regulated in ever more detailed ways by statutory bodies such as the Financial Services Authority. These bodies have no clear lines of accountability, nor do they have incentives to develop appropriate systems of regulation.

This monograph shows that the arguments in favour of statutory regulation are unconvincing and have weakened as the potential for international competition between exchanges has developed. The history of sophisticated self-regulating investment markets is an astonishing success story. Experience shows that statutory regulation of investment markets is unnecessary and has the potential to abuse important principles of the 'rule of law'. Given this, statutory financial regulators should be abolished. Some of their functions could be given to other government bodies, but one of their most important functions - that of regulating investment markets - should be handled by private bodies.

Keywords: financial regulation, financial services authority, FSA, stock markets, stock exchanges, private regulation

JEL Classification: G10, G15, G18, G20

Suggested Citation

Booth, Philip and Arthur, Terry, Does Britain Need a Financial Regulator? (August 4, 2010). Institute of Economic Affairs Monographs, 2010. Available at SSRN: https://ssrn.com/abstract=1711348

Philip Booth (Contact Author)

City University London - Sir John Cass Business School ( email )

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Terry Arthur

Institute of Economic Affairs (IEA) ( email )

2 Lord North Street
London SW1P 3LB
United Kingdom

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