The New Global Financial Regulatory Order: Can Macroprudential Regulation Prevent Another Global Financial Disaster?
Journal of Corporation Law, Issue 2, Volume 40
54 Pages Posted: 16 Apr 2014 Last revised: 4 Sep 2014
Date Written: April 14, 2014
The financial crisis of 2008, like the pandemic Spanish flu 90 years prior, spanned the globe twice and caused substantial destruction. It also introduced an entirely new lexicon of economic and regulatory terminology, such as “contagion” and “systemic shock,” into the popular and academic legal community; one such term is “macroprudential regulation.” Once an obscure term used by a select few banking economists, now it forms the cornerstone of a vast global regulatory regime with advocates claiming that it will prevent future systemic shocks. This article presents an overview of the challenge in the implementation of macroprudential regulation as it has gone from a theoretical construct to implemented policy. In particular, the article examines macroprudential regulation’s domestic and cross-border development and applications in the United States. The pertinence of this analysis lies in its examination of the strengths and weaknesses of macroprudential regulation, as well as the opportunities and threats faced by macroprudential regulation given that it is an economic theory being ported into a regulatory environment that is beset by social, political and administrative roadblocks.
Keywords: macroprudential regulation, law and economics
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