Financial Regulation: Emerging from the Shadows

Abstract

The topic of "Financial Regulation", and in particular, the regulation of the banking industry, is frequently discussed nowadays by academics, other researchers, bankers, and the bank regulators and supervisors themselves. During the past 20 years, the banking sector in a large number of countries has experienced severe crises, usually leading to substantial financial injections by the national governments. Examples include the serious problems with the savings and loan associations and commerical banks in the U.S. in the 1980s, the severe banking crisis in Japan (which started about 10 years ago and is still going on), the near-collapse of the banking system in Norway, Sweden and Finland in the late 1980s, and the crisis in Asia in the late 1990s. The crucial question is why, after a long postwar period of stability, banking problems became so widespread in the 19080s and 1990s.

Keywords: Regulatory, incentives, shadow committee, banking, subordinated debt, deposit insurance, Neo-Austrian finance, internal ratings, market discipline, capital requirements, basel committee

JEL Classification: M, M10, L2, G18