Regulating finance. Balancing freedom and risk

Abstract:

This work brings together a collection of essays by one of the foremost financial regulators in Europe at a time when financial regulation and supervision are at the forefront of policy making. The work comprises eight essays with a very helpful foreword by Charles Goodhart.

Essay number one addresses market-friendly regulation of banks and sets the scene for the rest of the book, dealing as it does with the Basel Committee responses to the fast changing trends in European banking and monetary development. The second essay, delivered to an American audience sceptical of financial regulation, emphasises the key role of banks in the provision of liquidity and therefore the continuing need to license and then to regulate them because of their exposure to systemic risk. Competition in banking is the focus of essay three, which describes the trends in financial regulation that have dominated over the past four or five decades. Essay four follows on from the need for banking regulation to consider how such regulation should be implemented, looking at the two key elements in that process, the use of financial standards and the development of process oriented regulation. The fifth essay examines the relationship between the securities activities and banking, asserting the need to ensure the interdependence of the two is sustained by development of regulatory systems appropriate to each.

The accent in the final three essays is on issues related to the European Union. Essay six considers the emergence of a single European financial industry and the appropriate regulatory system required for that - European or national, single or many. Essay seven narrows its focus upon Euroland and the problems of maintaining financial stability within a system where the area of jurisdiction of monetary policy and the area of jurisdiction of banking supervision no longer coincide. Essay eight had its origins as a discussion paper on central banking and financial stability submitted to the ECB’s second Central Banking Conference in October 2002. It was as such necessarily longer and ranges over many issues such as price stability and financial stability, the case for a more centrally integrated structure for banking supervision and an increase in sharing of information between central banks.

The essays will interest professionals engaged in financial regulation, governmental and non-governmental financial institutions as well as scholars and students.