Financial Regulation in Europe: Foundations and Challenges

41 Pages Posted: 18 Apr 2016

See all articles by Thorsten Beck

Thorsten Beck

City University London - Sir John Cass Business School; Tilburg University - European Banking Center, CentER

Elena Carletti

Bocconi University

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department

Date Written: March 2016

Abstract

This chapter discusses recent regulatory reforms and relates them to different market failures in banking, based on the recent theoretical and empirical literature with focus on insights from the recent crisis. We also provide a broader discussion of challenges in financial sector regulation, related to the regulatory perimeter and financial innovation as tools financial market participants use to evade tighter regulatory frameworks. We argue for a dynamic view of regulation that takes into account the changing nature of risk-taking activities and regulatory arbitrage efforts. We also stress the need for a balanced approach between complex and simple tools, a strong focus on systemic in addition to idiosyncratic regulation, and a stronger emphasis on the resolution phase of financial regulation.

Keywords: Banking, Basel III, financial stability, regulation

JEL Classification: G21, G28

Suggested Citation

Beck, Thorsten and Carletti, Elena and Goldstein, Itay, Financial Regulation in Europe: Foundations and Challenges (March 2016). CEPR Discussion Paper No. DP11147. Available at SSRN: https://ssrn.com/abstract=2766440

Thorsten Beck (Contact Author)

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

106 Bunhill Row
London, EC1Y 8TZ
United Kingdom

Tilburg University - European Banking Center, CentER ( email )

PO Box 90153
Tilburg, 5000 LE
Netherlands

Elena Carletti

Bocconi University

Itay Goldstein

University of Pennsylvania - The Wharton School - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States
215-746-0499 (Phone)

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