Reframing Financial Regulation

Charles Whitehead ()
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Charles Whitehead: Cornell Law School, Postal: 238 Myron Taylor Hall, Cornell University, Ithaca, New York 14853, USA

Journal of Financial Transformation, 2010, vol. 29, 57-69

Abstract: Financial regulation today is largely framed by traditional business categories. The financial markets, however, have begun to bypass those categories, principally over the last thirty years. Chief among the changes has been convergence in the products and services offered by traditional intermediaries and new market entrants, as well as a shift in capital-raising and risk-bearing from traditional intermediation to the capital markets. The result has been the reintroduction of old problems addressed by (but now beyond the reach of) current regulation, and the rise of new problems that reflect change in how capital and financial risk can now be managed and transferred.

In this Article, I begin to assess the current U.S. approach to financial regulation, in light of recent changes in the financial system, and offer a tentative way to address gaps in proposals for regulatory reform. Regulators must focus on the principal problems that financial regulation is intended to address – relating to financial stability and risk-taking – without regard to fixed categories, intermediaries, business models, or functions. Doing so, however, requires a prospective assessment of the markets, a different approach from the reactive process that characterizes much of financial regulation today.

This is an abridged version of an article first published in the Boston University Law Review, 2010. The complete article (including footnotes) can be found on-line at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1447424.

Keywords: financial regulation; bank regulation; financial reform; financial risk; financial intermediation; systemic risk; Dodd-Frank (search for similar items in EconPapers)
JEL-codes: G01 G18 G21 G24 G28 G32 G38 (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ris:jofitr:1427

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