Reforming Finance; A Literature Review

Ton Notermans
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Ton Notermans: Department of International Relations, Tallinn School of Economics and Business Administration, Tallinn University of Technology

Working papers from Financialisation, Economy, Society & Sustainable Development (FESSUD) Project

Abstract: The almost consensual view on the global financial crisis is that it should be attributed to massive regulatory failure. Regulation is either argued to have failed in constraining an inherently instable financial system or to have provoked the crisis by means of inappropriate regulatory changes. Even though a core conclusion from the present crisis is that a microeconomic focus on financial stability does not suffice and will need to be complemented by macroprudential regulation, there is also widespread consensus that the crisis has demonstrated the need to strengthen the microprudential regulatory framework itself. This literature review focuses on the microeconomic aspects of financial regulation. It is built around three main questions: what exactly did the regulatory failure consists of? How was it possible for regulatory failure to emerge? What lessons have been drawn from the crisis? Not surprisingly, the consensus in the literature evaporates when looking for precise answers to these questions. The introductory section of the paper address two broader question; i.e. why financial firms should be subjected to tighter regulation than the rest of the economy and how financial instability may be defined and measured.

Keywords: Banking Union; Corporate Governance; Credit Rating Agencies; Financial Sector Reform; Financial Stability; Household; Indebtedness; Microprudential Regulation; Shadow Banking; Sovereign Debt (search for similar items in EconPapers)
JEL-codes: G01 G21 G24 G28 G32 G35 (search for similar items in EconPapers)
Pages: 91 pages
Date: 2013-12-03
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-fmk, nep-hpe and nep-sog
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