Financial Regulation – Why, how and where now?

By Charles Goodhart, Philipp Hartmann, David Llewellyn, Liliana Rojas-Suarez and Steven Weisbrod

The problem of financial regulation has returned to centre stage in the wake of the turbulence caused by global financial volatility.

This volume, published in assocation with the Bank of England, responds to contemporary developments by preseting an important restatement of the purposes and objectives of financial regulation.

Regulators in the advanced economies are finding that the complexity of banking and the rise of financial intermediation are making external regulation via common ratios increasingly inappropriate. The authors argue that while there must always remain a role for external regualtion, there can be no alternative to placing greater reliance on internal risk managment. Thus, regulation is essentially about changing the behaviour of financial intermediaries through the creation of the appropriate incentive structure. This analysis is then applied to the nature and costs of regulatory problems in both the advanced and emerging ecnonomies, and appropriate techniques to recast the form of regulation are prescribed.

Published with a stimulating foreward by Eddie George, Governor of the Bank of England, this volume is a vital resource for students of finance, banking and development, as well as for those involved in the formulation of policy.