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The financial crisis that engulfed the world in 2007 and 2008 has led to a wave of re-regulation and discussion of further regulation that has culminated in the proposals from the Basel Committee as well as those in the Vickers Committee report on Banking Regulation and Financial Crises. This issue of the Review contains a number of papers on Banking Regulation, covering many aspects of the debate, and we can put that debate in perspective through these papers and also by discussing our work on the relationship between bank size and risk taking, which is reported in Barrell et al. (2011). We addressed the causes of the crisis in the October 2008 Review, and began to look at the costs and benefits of bank regulation in Barrell et al. (2009). In that paper we argued that we needed to know the causes of crises and whether the regulators could do anything to affect them before we discussed new regulations. It is now generally agreed that increasing core capital reduces the probability of a crisis occurring, and most changes in regulation that are being discussed see this as the core of their toolkit. The work by the Institute macro team in Barrell et al. (2009) and in Barrell, Davis, Karim and Liadze (2010) was the first to demonstrate that there was a statistically important role for capital in defending against the probability of a crisis occurring, and our findings were widely used in the policy community in the debate over reform.

AbstractThis paper examines whether a regulatory distinction between banks and other financial institutions, as proposed by the Campbell and Martin Reports, is an appropriate ingredient of financial regulation. Three specific issues relevant to the making of such a distinction are examined. They are entry to the payments mechanism, monetary control, and prudential regulation. In examining each of these three issues the roles of imperfect information and other financial market characteristics are stressed. The paper concludes that while a regulatory distinction between banks and others may be appropriate, the distinctions suggested by the Reports and associated regulatory frameworks are unwarranted.

The Asian financial crisis (1997 - 1998) and the global financial crisis (2007 - 2009) highlighted the potential value of financial regionalism, i.e., regional-level cooperation in financial policy. This paper argues that there is a mediating role for regional-level institutions of financial regulation between national regulators in Asia and global-level institutions such as the International Monetary Fund and the Financial Stability Board. This potential role includes: (i) monitoring financial markets and capital flows to identify regional systemic risks such as capital flows; (ii) coordinating financial sector surveillance and regulation to promote regional financial stability; and (iii) cooperating with global-level institutions in rule formulation, surveillance and crisis management. This is particularly important in an environment of increasing financial integration and harmonization in the region. The paper considers experiences of the European Union (EU) and Asia in regional financial cooperation and regulation and draws lessons for Asia. The EU represents the most advanced stage of regional financial integration and regulation in the world today, and can provide valuable lessons for Asia. Asia's greater diversity of financial development and openness requires a more nuanced approach to integration. Despite its shortcomings and slow pace, the Association of Southeast Asian Nations (ASEAN) Economic Community process probably provides the most feasible and relevant model for regulatory cooperation on a voluntary basis. It would be desirable to extend this framework further in Asia, say to the ASEAN+3 countries for a start. Asian economies can also strengthen existing surveillance processes; enhance and diversify the resources, functions and membership of the Chiang Mai Initiative Multilateralization and the Macroeconomic Research Office for surveillance and provision of a financial safety net; and create an Asian financial stability dialogue to monitor regional financial markets, facilitate policy dialogue and cooperation, and secure regional financial stability.

David T. Zaring (University of Pennsylvania - Legal Studies Department) has posted The Corporatist Foundations of Financial Regulation (Iowa Law Review, Vol. 108, No. 3, 2023) on SSRN. Here is the abstract: Banks are subject to heavy regulation that is...

Sketches the developments which destroyed the old regime in financial services, outlines the events which led to the present reforms and describes the forces which have turned these reforms in unexpected directions. (AM)