The Political Economy of Financial Regulation in Advanced Industrial Democracies

I The Evolving International Financial Environment.- 1 Global Financial Markets: The Past, The Future, and Public Policy Questions.- 2 The Telecommunications and Information Revolution: Implications for Financial Markets, Trading Systems, and Regulation.- 3 The Financial System and Global Socioeconomic Structural Changes.- II Banking and Financial Intermediary Markets.- 4 Japanese Banking, Financial Markets, and Competitive Equality.- 5 Banking in the United Kingdom and Continental Europe.- 6 Banking and Financial Intermediary Markets in the United States: Where From, Where To?.- 7 Financial Intermediation and Liberalization in Japan.- III Securities Markets.- 8 Internationalization and Regulation of the World's Securities Markets.- 9 Japanese Securities Markets and Global Harmonization.- 10 Reflections on the CFTC/SEC Jurisdictional Dispute.- IV Futures Markets.- 11 Regulation of Futures Markets in the United Kingdom.- 12 The Japanese Financial Futures Market: Present and Future Prospects.- 13 The Internationalization of Futures Markets: Issues for U.S. Markets.- V International Clearance, Settlement, and Payment Procedures: The Role of Regulation.- 14 Automation of the Financial Markets: Implications for Clearance, Settlement, and Payment Procedures.- 15 Twenty-Four Hour Trading, Clearance, and Settlement: The Role of Banks.- 16 Screen-Based Trading in Japanese Financial Markets.- 17 Cooperative Approaches to Reducing Risks in Global Financial Markets.- VI Is There a Systemic Risk Problem in International Financial Markets?.- 18 Systemic Risk in International Securities Markets.- 19 Government Officials as a Source of Systemic Risk in International Financial Markets.- 20 Systemic Risk and International Financial Markets.- VII National Autonomy Versus International Cooperation.- 21 Competition Versus Competitive Equality in International Financial Markets.- 22 Regulatory Harmonization To Achieve Effective International Competition.- 23 Regulating Global Financial Markets: Problems and Solutions.

The purpose of this original study is to critically analyse the emergence and development of the national models of financial regulation, international standards and codes, and regional and national financial regulation and supervision (for the cases of the UK, USA, Sweden, the EU, and Finland). The research raises both academic and regulatory concerns. The relevance and purpose of this research arise from a need for an academic analysis of the economic nature and classification of financial market regulation systems. They represent a theoretical justification for changes in the policies and supervisory practices of national and international regulatory authorities in response to innovations in financial technologies and instruments, digital products, and risks. Secondly, it will stimulate more systematic work on regulatory databases, registration, and reporting procedures in various economies in different financial markets. The author identifies five main systems of national financial regulatory markets: the multi-tiered, multi-agency US system, the twin peaks model (UK), and the mega-regulatory model (Sweden). There is a thorough review of the international standards and institutions that work for the stability of financial systems. The analysis of the regional and national systems of financial regulation and supervision is based on the examples of the EU and Finnish institutions. National macro- and micro-economic regulation and supervision have been examined, with a focus on the US Federal Reserve and the US Treasury. An important result of the study is the systematisation of the directions of the development of national and international regulatory institutions (since the 1980s). First, the minimum capital and credit risk requirements for banks (the 1980s) were complemented in the 21st century by buffer reserves, liquidity, and leverage standards. Second, regulation focuses on ensuring the sustainability of the national economy. The regulatory focus is on ensuring the sustainability of national and global financial systems. Third, there is an increase in the number of supervised institutions. Fourth, there is a division of the functions between central banks (macro-economic regulation) and one or two mega-regulators (micro-economic regulation and supervision). Fifth, there is a division of labour between the international financial institutions (BIS, IMF, and WB) and national regulators. Sixth, the focus is on protecting consumers and investors and countering money laundering and the financing of terrorism. Seventh, there is an understanding based on a common approach by central banks to new financial technologies and cybersecurity.

As part of the response to the financial crisis, the ECB has been transferred tasks in banking and financial supervision. In parallel to its traditional mandate, the implementation of monetary policy, it is now responsible for ensuring financial stability and acts as a central supervisor of credit institutions. This paper deals with challenges that arise from entrusting the ECB with tasks of banking and financial supervision and therefore the ambiguity of the term “financial market regulation in the crisis”. Financial market regulation in the crisis can be looked at from two perspectives: On the one hand, it can be understood as being a response to the crisis. On the other hand, the term can imply that financial regulation itself is in a crisis. In this paper the difference between the two possible interpretations is discussed based on the example of the ECB and its tasks in banking and financial supervision. To this end, the new fields of activity of the ECB and possible problem areas are presented. Afterwards, it is concluded that financial regulation has developed from a financial market regulation in response to the crisis into a crisis of financial regulation.

Reviewed by: A History of Financial Technology and Regulation: From American Incorporation to Cryptocurrency and Crowdfunding by Seth C. Oranburg Florian Vetter (bio) A History of Financial Technology and Regulation: From American Incorporation to Cryptocurrency and Crowdfunding By Seth C. Oranburg. Cambridge: Cambridge University Press, 2022. Pp. 200. This book is an important contribution for financial historians insofar as it shifts away from a purely institutional perspective. At first glance, Seth C. Oranburg's work appears to reconstruct the milestones of the regulations of the U.S. financial markets and their transformation through the introduction of technology. However, a closer reading reveals that the author focuses on a large panorama of actors such as investors, state institutions, financial institutions, and small investors. In doing so, Oranburg highlights that ordinary investors and small businesses are often left behind when it comes to investing. He argues that today's regulatory apparatus in America is incredibly cost intensive for the taxpayer, leads to disparities in wealth, and makes it almost unprofitable for new actors to enter financial markets. Oranburg's book distinguishes itself from other works of financial history by its analysis of the intertwining of regulation and technology. The author bases his arguments mainly on current literature, quotations, advertisements, and photographs. The work covers the period between the 1790s and 2020. After a brief introduction, Oranburg introduces the key concepts of financial regulation and digital investment strategies in eleven chapters. The book focused on the intertwining of technology, regulation, and various actors within the American financial market. In addition, Oranburg demonstrates how laws and regulations prevented financial crises but also caused them. The history of corporate finance and financial markets in the United States is described across three epochs. The author shows that the first era (1790s–1930s) was characterized by capitalism and individualism. It becomes clear that between the 1790s and 1930s, the United States consisted of many unconnected financial markets. However, the advent of technologies such as the railway or the telegraph helped the individual states to grow together into an economic union. Consequently, the advent of technology led to the fact that financial crises took place on a national scale in the United States. The second era (1933–2008), according to the author, was characterized by a centralized command and control approach to securities regulation. Furthermore, the Great Depression had a significant impact on political and economic change in the United States. Here, Oranburg describes how the U.S. government created new federal agencies to counteract inflation after Franklin Delano Roosevelt became president. The Securities and Exchange Commission (SEC) serves here as a case study to demonstrate how the growing federal bureaucracy became increasingly costly for the taxpayer. Thus, it becomes clear that the international crisis also led to centralization and consolidation [End Page 615] in the United States. As a result, New York rose to prominence as a financial center. Silicon Valley started to flourish as investors began to invest in new companies and start-ups instead of publicly listed companies. During this period, America's middle class also began to benefit from these regulations and changes as corporate profits seemed to flow into a growing middle class. From the 1990s onward, Oranburg highlights a fundamental change in investment. Until this time, stocks were primarily owned by large corporations rather than individuals. The author concludes this period with the dot-com era (mid-1990s–2000s) and illustrates through the resulting financial crisis in 2000 how domestic stock markets were reregulated to prevent further crises. In the third era (2008–20), Oranburg uses Bitcoin, social media activism, decentralized finance, and crowdfunding as case studies to show how financial regulation has fallen far behind financial technology. In doing so, he skillfully builds a bridge from the Great Depression to the digital age. He demonstrates that federal laws to regulate communication about investment opportunities from the beginning of the twentieth century are now no longer applicable. Oranburg has managed to write a book that offers financial historians as well as nonspecialists new perspectives. By adding simplified examples of economic theory in each chapter, the book serves as a good introduction for readers outside the field of financial history. These examples help...

The article covers key formats of interstate cooperation in the post-Soviet space. The authors conclude that the Eurasian Economic Union is the major integration project bringing together Armenia, Belarus, Kazakhstan, Kyrgyzstan, and Russia. This research addresses various legal issues related to founding of the EAEU single financial services market with provisions and annexes of the EAEU Treaty studied. The EAEU meets challenges and creates legal and institutional framework for single financial services market within a relatively short timeframe. By 2025 both Supranational Eurasian financial regulator should be established and EAEU legislation on financial services should be harmonized. These tasks require international and national regulation experience. Therefore through the use of comparative analysis some advantages of the European Union law in the field of financial services market regulation are pointed out alongside with particular national legislation aspects of the EAEU member states in the similar or relative fields. Comparative analysis provides for determination of modern approaches to financial services market regulation in the EAEU and its member states, and allows to emphasize advantages and disadvantages of such regulation. Comparative analysis is applied to specifically investigate three subject areas of high relevance for global financial community: institutional forms of trade in financial instruments; organized trade in financial derivatives; organization of algorithmic and high-frequency algorithmic trading. Conclusion drawn is that the EU experience in the matters of financial markets regulation is of particular interest for the EAEU and its member states.

The response to the global financial crisis (GFC) of 2007–2008 has famously been described as the problem of too-big-to-fail.1 In the middle of a worsening crisis, financial regulators had to recognize that bank bailouts were the only way to stabilize financial markets. One of the two priorities of regulatory reforms post-crisis was to address the too-big-to-fail problem by introducing a resolution procedure for systemically important financial institutions.2 Among financial regulators (with the notable exception of the USA), contingent convertible bonds (CoCos) were seen as a major innovation to address the too-big-to-fail problem and quickly became a popular “bail-in” instrument to facilitate the instant recapitalization of a distressed bank. The quick deleveraging that could be achieved with CoCo conversions would serve the dual roles of recapitalizing “a going-concern bank” and reducing the resolution costs for a “gone concern” bank. During the press conference on March 19, 2023 the Swiss Financial Market Supervisory Authority (FINMA) announced that, as part of the emergency package in response to the loss of trust and the run on Credit Suisse, the contingent convertible bonds that were part of the Credit Suisse Additional Tier 1 (AT1) regulatory capital had been written off.3 The decision by FINMA took many by surprise and provoked a flood of negative market commentary, with the commonly stated view that conversion violated the priority order of claims between debt and equity. Indeed, in the final rescue deal, the shareholders of Credit Suisse retain around $3 billion of equity value, while the CoCo bond principal write-down amounted to a wipeout of $17 billion for CoCo investors. Implicitly corroborating this commentary, the European Central Bank (ECB), the Bank of England, and other regulators made public statements on the Monday following the Credit Suisse deal that they do not intend to follow the FINMA approach and that they intend to respect the usual priority order of claims in resolution.4 How can these divergent views of regulators be reconciled? Why did the Credit Suisse AT1 CoCo bondholders face losses before shareholders were wiped out? What are the lessons for the effectiveness of post-GFC too-big-to-fail reforms? This article provides clarification of these important questions. CoCo bonds are designed to absorb losses of a distressed going-concern bank at conversion, thereby helping to capitalize the bank. Their primary purpose is to reduce the need for a capital injection by the government in times of crisis when nobody else is willing to provide additional external capital. Such public support is costly to taxpayers and exacerbates moral hazard. CoCo bonds have two main contract features: the loss absorption mechanism and the trigger that activates that mechanism (illustrated in Graph 1).5 CoCos can absorb losses either by converting into common equity or through a principal write-down (partial or full). The trigger can be either mechanical (i.e., defined in terms of a capital ratio) or discretionary (subject to supervisory judgment). The trigger defines the point at which the loss absorption mechanism is activated. The mechanical trigger activates the loss absorption mechanism when the capital of the CoCo-issuing bank drops below a pre-specified fraction of its risk-weighted assets. The bank's equity capital can be measured either based on book value or market value. The discretionary, or point of non-viability (PONV), trigger is activated based on the supervisor's assessment of the bank's possible insolvency. PONV triggers give regulators authority to convert, if and when they decide that the issuer has reached that state. Because the PONV is difficult to determine ex ante, PONV triggers introduce uncertainty about the timing and circumstances leading to the activation of the loss absorption mechanism by the regulator. CoCo bonds typically have more than one trigger. In case of multiple triggers, the loss absorption mechanism can be activated when any trigger is breached. Under Basel III rules, all regulatory capital CoCos are required to have a discretionary PONV trigger. The activation of the discretionary trigger, which was present in all CoCos issued by Credit Suisse, was exactly what allowed FINMA to write down Credit Suisse AT1 capital instruments on March 19, 2023. The loss absorption mechanism is the second contract feature of CoCos. Once the trigger is activated, CoCos can be either converted to equity at a pre-defined conversion rate or subject to a principal write-down. In either case, the conversion delevers the bank and/or boosts its equity capital ratio. For conversion to equity CoCos, the conversion rate can be based either on the market price of the stock at the time of conversion, or on a pre-specified price, like the stock price at the time of issuance. It is also possible to have a combination of market price and prespecified price floor, where the latter defines the floor for the conversion rate and hence protects existing equity holders from unlimited dilution. The various options for setting the conversion price lead to different exposures to dilution risk for existing equity holders, and thus create varying incentives to avoid conversion by existing equity holders. In the case of the principal write-down CoCos, the haircut can be either full or partial. However, most of the principal write-down CoCos of Credit Suisse were full write-down CoCos. The write-down CoCos potentially encourage risk taking by managers acting in the interest of shareholders. The regulatory treatment of CoCos under Basel III and the supplementary requirements of national regulators shape the design choices of CoCo contract features of issuing banks (that can be seen in Graph 2). Under the Basel III framework, CoCos must satisfy two requirements to qualify as regulatory capital. The first requirement, which applies to both AT1 and T2 instruments, is satisfied by the PONV trigger. The second requirement is the going-concern rule, which specifies that the minimum trigger level of CET1/RWA to qualify as AT1 is 5.125%. In addition, AT1 instruments must be perpetual. Importantly, these features are not necessarily outcomes of optimal financial contracting between the issuer and its investors. The regulatory rationale for CoCos is to improve banks’ resilience to financial shocks by strengthening their capital buffers in a crisis, while also providing investors with an investment opportunity that is distinct from debt and equity. By issuing CoCos, banks can raise capital while limiting the dilution costs of current shareholders at issuance and reduce the likelihood of becoming insolvent or requiring a government bailout. In particular, CoCos allow banks to seamlessly recapitalize during times of financial stress. The conversion or write-down of CoCos allows the bank to transfer some of the losses to CoCo investors, ensuring that the costs of bank failures are borne by investors rather than taxpayers. In addition to reducing the cost of distress, the possibility of CoCo conversion provides bankers with incentives to limit the probability of distress. CoCos can be an attractive investment opportunity for long-term investors who understand and are able to take losses in a crisis. CoCos typically offer higher yields than traditional bonds due to their contingent nature, their low priority ranking (on par or even lower than equity investors), and the high systematic component in their risk. Because institutional mandates often block traditional fixed income investors from taking positions in conversion to equity CoCos, the market yield on the instruments may also contain a premium for sophisticated and flexible investors in terms of market segregation. In their 2013 Primer on CoCos published by the Bank for International Settlements, colleagues Stefan Avdjiev, Anastasia Kartasheva, and Bilyana Bogdanova show that the yield-to-maturity of newly issued CoCos are on average 2.8% higher than the subordinated debt, and 4.7% higher than the senior unsecured debt, of the same bank.6 However, the popularity of CoCos could also be partly driven by the search for yield in a low interest rate environment, which have been touted by financial advisors that sometimes misrepresented the product as a relatively safe way of boosting yield. CoCos are often perceived as similar to total loss absorbing capacity (TLAC) instruments, since they are also financial instruments designed to “bail-in” troubled systemically important banks. There are, however, key differences between the two. The primary purpose of CoCos is to delever a bank amid a crisis, by writing down debt or providing equity capital, or both. CoCos are thus designed to maintain the equity cushion of a going concern bank. TLAC, which are usually T2 capital, are additional loss absorption requirements for global systemically important banks (GSIBs) like Credit Suisse to enable a single point of entry resolution. The goal of TLAC is to ensure that the holding companies of systematically important banks have sufficient capacity to absorb losses so that their operating affiliates can continue operating without putting their liabilities at risk. By contrast, CoCo conversion could take place while the bank is still a going concern. A 2020 article in the Journal of Financial Economics we wrote with Stefan Avdjiev and Bilyana Bogdanova provides the first comprehensive analysis of bank CoCo issuance.7 Out of the 731 Coco issues raising over $500 billion between 2009 and 2015, European issues took the largest share (39%), while U.S. was absent from the list. At the time of the Credit Suisse trigger event, the global AT1 CoCos market was estimated to be $254 billion.8 About 56% of these CoCos include a mechanical trigger. Though in the first years of our sample mandatory conversion CoCos were prevalent, principal write-down CoCos have become more popular over time, eventually dominating the market. Finally, slightly more than half (55%) of the CoCos up to 2015 were classified as AT1 capital, while most of the T2 CoCos tend to be issued by banks in emerging economies. Our 2020 Journal of Financial Economics article also shows that the propensity to issue a CoCo is higher for larger and better capitalized banks. Presumably only relatively healthy banks, with remote conversion risk, are able to issue CoCos at a reasonable cost. Another reason is that the principal beneficiaries from a CoCo issue are senior bondholders, whereas shareholders expose themselves to dilution risk. The same JFE article shows that the CDS spreads of CoCo issuers decline upon the announcement of a CoCo issue, indicating that they generate risk-reduction benefits and lower costs of debt. While the average reduction in CDS spread was 2.7 basis points, the drop was more prominent for conversion CoCos (5.0 bps), including those with mechanical triggers (3.3 bps). Conversion CoCos with mechanical triggers are also associated with a reduction of 6.2 bps in CDS spreads. Only Additional Tier 1 instruments contributed to the reduction of CDS. Finally, CoCo issuances have no statistically significant impact on the issuers’ stock prices, except for the case of principal write-down CoCos with high trigger levels, which involve no dilution risk for shareholders and for which stock price responses have been significantly positive on average. Such a contrast suggests a potential moral hazard on shareholders’ part to take excess risk, since the cost will be first borne by the holders of write-down CoCos. CoCos that convert to equity offer a superior design from the point of view of reducing bank fragility. In the case of Credit Suisse, all outstanding CoCos were principal write-down CoCos, and this is the reason why their investors received no equity stake in the merger with UBS. Had they issued conversion to equity CoCos, they would have received shares in the merged company. The collapse of Silicon Valley Bank (SVB) on March 10, 2023 sent shockwaves through the financial system and quickly drew investors’ attention to the prominent weaknesses at Credit Suisse, which was impelled to seek up to CHF 50bn in liquidity support from the Swiss National Bank (SNB) on March 16, 2023. This dramatic move failed to quash speculation, or slow down deposit withdrawals, to the extent that 2 days later the SNB and FINMA announced that they had begun proceedings to organize a takeover of Credit Suisse by UBS. The Swiss financial regulatory authorities had decided that the best way to avert another GFC was to rescue Credit Suisse through a merger with a strong financial institution, following the playbook of the Federal Reserve and US Treasury in 2008 with its rescue of Bear Stearns through a merger with JPMorgan and what has colloquially become known as the “Jamie deal” in reference to the CEO of JPMorgan.9 It is revealing to contrast these two deals, as the contexts are different and the limits on the legal authorities of regulators are different. The Federal Reserve and Treasury did not have nearly the same authority to push through a merger as the Swiss government under the Swiss emergency law. The Federal Reserve had to invoke section 13(3) of the Federal Reserve Act to claim authority to provide liquidity support “under unusual and exigent circumstances” to a broker-dealer. Beyond the authority to provide liquidity support the Federal Reserve (and US Treasury) had no means other than moral suasion to get the management of Bear Stearns and JPMorgan to agree to merge at a proposed price of $2 per Bear Stearns share. They had no authority to sidestep shareholder agreements at both Bear Stearns and JPMorgan, and they could not write down Bear Stearns liabilities outside Chapter 11 bankruptcy. The only way the deal could be structured outside bankruptcy was as a purchase-and-assumption deal whereby JPMorgan agreed to assume all Bear Stearns liabilities. However, even at the price of $2 per share, this was seen as too risky by JPMorgan management and might not receive the blessing of JPMorgan shareholders. To overcome this hurdle the Federal Reserve agreed to back up the deal by setting up an innovative collateralized special purpose vehicle—Maiden Lane LLC. This vehicle would be financed with a junior tranche of $1 billion from JPMorgan and a $29 billion senior tranche of the Federal Reserve, and it would purchase up to $30 billion worth of troubled assets of Bear Stearns, thereby de-risking the Bear Stearns balance sheet. The Federal Reserve and Treasury also had to make concessions to Bear Stearns shareholders by eventually raising the share price to $10.10 Although this deal was in and back some in financial a later a similar merger between and the The Swiss regulatory authorities were in a better to a deal between Credit Suisse and UBS. They could shareholder a resolution of and they did not have to public at risk by setting up a special purpose vehicle to the Credit Suisse balance sheet. they had to do was trigger the write-down of Credit Suisse CoCos that had been designed and issued for a contingent FINMA did that, that government support Credit will trigger a write-down of the value of all AT1 shares of Credit Suisse in the of around and thus an in The principal write-down of these AT1 instruments allowed for a of the Credit Suisse balance sheet. that one of the main of the Bear Stearns and later in the of has been that the of in all these a moral hazard in in this the write-down of the Credit Suisse AT1 bonds would not only the Credit Suisse balance also market that of systemically important financial would be in a crisis. Although the write-down of Credit Suisse CoCos following the rescue of Credit Suisse was it in financial and a crisis in the AT1 bond market. in Credit Suisse AT1 bonds were that their bonds had been written down even Credit Suisse shareholders the first in the CoCo To many as we have this to be an of a and of at the Financial market is to be by a of the of and by the decision to an equity deal at the of bond There had been a of a similar CoCo write-down in when was over by in that case shareholders had been wiped so that was at an that part of the that equity the most junior had been It is not investors who were also financial regulators outside potential in the billion AT1 bond of the quickly on that a resolution in the European we would follow the and we to it to the investors, to avoid to be we have no to respect this the Monday following decision the with the and issued the common equity instruments are the first to absorb and only their full would Additional Tier 1 be required to be written This approach has been in and will continue to the of the and in crisis from and regulatory only to It was only a of a days before of The and quickly announced that a was in the Credit Suisse rescue as “a resolution up as a and on the and responses that has when other regulators and point that in a resolution would have investors like the and of a global in that, this is to can trust any debt issued in or for that if can the are made to be did in the terms ex and the of AT1 most of the CoCos issued by Credit Suisse are principal write-down CoCos with similar For the CoCo issued in on the following based on Credit Suisse ratio. a or to a a the full principal of the will be and written and of the in the for the of and The that will if Credit Suisse common equity 1 by its risk assets as of any balance in the case of of these instruments, other by is below and FINMA has not agreed in writing to of CET1/RWA that a full conversion or as not it is satisfied that circumstances or have or will the of the CET1/RWA to a level that it to be In addition, the following will if either FINMA that it has that a conversion or of the with the conversion or of claims in respect of all other regulatory capital instruments issued by a of the Credit Suisse that, to their terms or by of are of converted into equity or at that time, to improve capital are at the time or an requirement to from becoming or to a part of its as they or from to on its or to improve capital at the time or an of support from the public and in the that or will the of capital and without in the of would have become to a part of its as they due or to on its The of either or both of these two is also to as the of or the The additional Credit Suisse on AT1 bonds “under FINMA has the to proceedings with respect to under Swiss is subject to the resolution under Swiss and if the have not been subject to a could convert the into equity or the in case, in or in be that, in the case of any conversion into FINMA would follow the order of priority under Swiss which other that the would have to be converted to the conversion of any of subordinated debt that not qualify as regulatory capital with a write-down or conversion in the case of any FINMA may not be required to follow any order of which other that the could be in or in part to the of any or all of equity are not to FINMA its authority under these to trigger conversion it that Credit Suisse had reached the The Credit Suisse CoCos were not “gone concern” CoCos concern” CoCos. By these CoCos, FINMA the AT1 as they were to to allow for a recapitalization so that Credit Suisse could be back to a point insolvency. A first has been by and FINMA on that the AT1 bond write-down was and that FINMA did not in the collapse of up on Credit Suisse with both its stock price and its CDS spread Financial an in investors’ perceived probability of a and the announcement of the billion from the SNB did not these Though investors the possibility that could be a on Credit Suisse as in the CDS the below suggests that investors did not a write-down of AT1 bonds on the of the takeover of Credit Suisse It is difficult to what of investors the possibility of a write-down of AT1 bonds even if shareholders were not wiped the of the Credit Suisse CoCo bond issued in in these bonds higher interest than bonds as for the risk of a write-down. higher investors in a low interest rate environment, and their high yields were part of a major like this one in by a Credit Suisse the of CoCo market a yield of around even European bonds in at around so we still value in subordinated financial bonds The average European bank would need to of its capital to investors in AT1 bonds may not have been of the they were that CoCos were as issued by systemically important financial might also be of the that CoCos are junior to equity. This is for the view by the CEO of banks market AT1 bonds as and get with the yields on The surprise of decision can also be seen in the AT1 bond market following the write-down. the below was a in this market in the days following the Credit Suisse in addition to the of the contingent of CoCos. the market has since for the CoCo write-down in was no of CoCo conversion one could from the Credit Suisse CoCos as CoCo conversion or write-down up the balance of a bank in and stabilize financial could only and our analysis in our 2020 Journal of Financial Economics article could at only what investors at the time of issuance. the Credit Suisse only one many lessons can be from this The first is that the way CoCos have been structured is a of some sophisticated investors to have been about the between going-concern and CoCos. often did not that was a and for those who it was not to the The of going concern CoCos is to allow the bank could by a that before equity investors are wiped Another of that to a of uncertainty in the Credit Suisse is the of multiple triggers, an trigger when a capital is and a discretionary trigger that the financial could if it that the issuer had reached the This to and costly It also the risk of to investors. One of the with the discretionary trigger is what the PONV is have been regulators ex and to regulatory The that the and that they had to that they did not intend to from priority to the AT1 bond market is revealing of the extent of regulatory that is in these instruments, which to the and discretionary triggers, and their the in the probability of a CoCo There are no financial that can be to price these contingent with decision to write down Credit Suisse AT1 the by the and and the in the AT1 bond market following the write-down have the market for this important instrument and of capital for banks. It would be a if the of the Credit Suisse were the of CoCos from bank regulatory capital when the Credit Suisse CoCos have their for a and which the of the merger deal with and so Swiss taxpayers to losses from Credit In its decision FINMA also a healthy financial in AT1 bond by investors that their investment the first of risk and that due is before in these and of CoCo is with all the around the Credit Suisse One design that has been in the of of CoCos following the financial crisis that is worth is the CoCo design proposed by one of the present with in our article in The proposed design has main and The more is a CoCo without or discretionary trigger, an for the issuer to convert the claim into equity. Under this the CoCo-issuing bank would in purchase a to issue equity at a pre-specified price, as to the convertible bonds for which the the conversion This is the design for a going-concern It is not a for debt a capital for the issuing bank. It in a of in equity that the issuing bank to raise equity capital at terms in a crisis. In with we that a capital the costs of holding an equity capital for banks by to raise equity capital only when it is at a cost. Because this CoCo design is structured as a convertible bond collateralized for the the optimal conversion point is based on and thus the of the CoCo is an a uncertainty and around the instrument is Another of this instrument is that it provides a to equity capital. The CoCo bond the issuer the to issue capital at terms in a difficult time, often in and thus its equity capital This CoCo design in a of capital with the that the issuer can decide when it is to thus the on regulators to decide when it is to the equity capital under this design the issuer the CoCo into equity when the equity value is thereby recapitalizing the bank and strengthening its balance when it is Finally, the convertible CoCo design the of the in the conversion decision (and all the associated legal as is the case due to the discretionary trigger requirements of AT1 capital instruments under Basel In the of the Credit Suisse CoCo investors have the Swiss regulatory authority for a rescue that to investors’ assets following the Credit Suisse takeover by The collapse of Credit Suisse an important for financial their to up resolution for the the and of of resolution has so the risk of a like Credit Suisse that the Swiss regulatory authorities decided that a purchase and deal with by the SNB was to the Financial at the between the Swiss regulatory authorities and Credit Suisse on March where the SNB the CHF 50bn they also another will merge with and before This is not a on the would have been a for the financial system and the of around the another at the were also a is not for the Swiss we on the we would and one of the of the Swiss Federal in an with the that Credit Suisse have an financial a systemically important bank be up to the to this would be In however, the would be The of Credit Suisse would have other banks into the one this The is that financial regulators must the current approach to the too-big-to-fail problem and resolution. What is the point of TLAC and if when push to regulators a over resolution. One important positive of the Credit Suisse crisis, however, is that it has that $17 billion of CoCos can be written without the system into the This quick and debt write-down has some way in the too-big-to-fail problem and has significantly the cost of Credit Suisse for the Swiss all the too-big-to-fail the Credit Suisse CoCos did their financial on the of contingent capital like CoCos that can be activated to a bank's regulators also need to the of CoCo in terms of their conversion mechanism and their trigger triggers that are in CoCos offer regulators a possibility to in the middle of the crisis. the regulatory it difficult to price the risk of conversion as we in thereby the effectiveness of In we proposed an CoCo providing the issuing bank an to convert into are more and flexible instruments designed to give banks the opportunity to recapitalize during a crisis, and they are more to price the trigger is at the of the and CoCo requirements that enable recapitalization of a troubled bank be the of regulators in and in the and

After the financial crisis in 2007, the high risk brought by financial innovation has aroused widespread concern and thinking again. The measures to curb financial innovation in various countries have become increasingly severe. However, under the background of the supply-side reform proposed by the Chinese government, the reform of the financial capital elements of the supply root is imperative. Therefore, how to curb the risk of innovation in financial institutions effectively, while encouraging innovation in favor of financial supply side of the reform of compliance, become an important issue to be solved. Based on the limited rationality, the long - term dynamic game equilibrium between financial institutions and regulators and its impact on financial system and financial market is analyzed by constructing asymmetric evolutionary dynamic game model. Then, analyzing the relevant factors of long-term equilibrium, and puts forward the regulatory measures which are conducive to encouraging the reform of compliance and the reform of financial supply-side.

Contents: Preface 1. The Global Financial Crisis and its Implications for Financial Sector Reform and Regulation in Asia David G. Mayes and Peter J. Morgan PART I: FINANCIAL SURVEILLANCE AND REGULATION TO PREVENT CRISES 2. Regulating Systemic Risk Masahiro Kawai and Michael Pomerleano 3 Enlisting Macroprudential and Market Regulatory Structures to Strengthen Prudential Supervision Larry D. Wall 4. Dynamic Provisioning: Some Lessons from Existing Experiences Santiago Fernandez de Lis and Alicia Garcia-Herrero 5. Securitized Products, Financial Regulation and Systemic Risk Mariko Fujii 6. Liberalization and Regulation of Capital Flows: Lessons for Emerging Market Economies Rakesh Mohan and Muneesh Kapur PART II: REGIONAL FINANCIAL MONITORING AND COORDINATION 7. The Financial Crisis: A Wake-up Call for Strengthening Regional Monitoring of Financial Markets and Regional Coordination of Financial Sector Policies? Adalbert Winkler 8. Regional Monitoring of Capital Flows and Coordination of Financial Regulation: Stakes and Options for Asia Michael G. Plummer PART III: FINANCIAL CRISIS MANAGEMENT AND RESOLUTION 9. The Role of State Intervention in the Financial Sector: Crisis Prevention, Containment and Resolution Yoon Je Cho 10. The Role of the State in Managing and Forestalling Systemic Financial Crises: Some Issues and Perspectives Charles Adams PART IV: PROMOTION OF ASIAN BOND MARKETS 11. Developing Asian Local Currency Bond Markets: Why and How? Mark M. Spiegel 12. Foreign Bond Markets and Financial Market Development: International Perspectives Jonathan A. Batten, Warren P. Hogan and Peter G. Szilagyi

Abstract. The article reveals the main features of the financial services market and its regulation by the state. The analysis of factors influencing the formation of the system of state regulation and infrastructure of the financial services market of Ukraine is carried out, the current state of the system of state regulation of the financial services market of Ukraine is characterized. The periodization of the evolution of the formation and development of the system of state regulation of the domestic financial services market has been carried out. The results of this study suggest that ensuring the greatest efficiency of the system of state regulation of the domestic financial services market is possible through the comprehensive implementation of a number of measures and actions. In particular, a set of measures is proposed, which takes into account the factors influencing the formation and formation of the system of state regulation of the financial services market, the most pressing problems of the financial services market, strategic priorities for further development of the domestic financial services market regulation system. At the same time, it is established that the priority should be to strengthen the institutional capacity of state financial institutions, increase the level of transparency of their activities, as well as increase the functional efficiency of the financial services market regulation system. Keywords: institution, state regulation, principles, mechanism, financial services market. Formulas: 0; fig .: 0; tabl.: 1; bibl.: 16.

Financial market policies and regulation are inherently political issues, the implications of which run wider from markets themselves and their robustness or fragility, to encompass questions of political authority (technocrats or politicians?). Yet, in the long run-up to the financial crisis beginning in 2007, the governance of financial markets was accepted as being ‘beyond’ democratic direction. The first objective of this chapter is to explore aspects of de-democratisation, as it emerged historically in the UK and became a model for the EU. The second objective is to ask whether the crisis provided an opportunity to extend the perimeter of democracy to cover questions of the design of financial markets, or whether the converse occurred. A final objective is to think about the (potentially diverse) normative stances that might be taken within financial markets, and within international regulatory networks, vis-a-vis the prospect of democratic control. An important proviso is that it is not the purpose of the paper to argue for ‘more regulation’, or for ‘less’, indeed it is argued that the posing of regulatory questions in more or less terms obscures the more important underlying issue of ‘regulation by whom’.

This study aims to conduct a bibliometric analysis on the topic of public policy and financial regulation in preventing and combating financial fraud using a variety of bibliometric methods and tools, including the in-built tools of Scopus by Elsevier (SciVal) and Web of Science by Clarivate Analytics, as well as VOSviewer software. The most relevant publications related to the search terms were identified. Based on the results, a map illustrating the interrelationships of concepts such as “financial fraud,” “public policy,” and “financial regulation” with other categories was created, allowing for the identification of five clusters, each of which was characterized in detail. The results of the evolutionary and temporal analysis of scientific research showed that before 2000, scholars focused on the legislative aspects of combating financial fraud; from 2000 to 2015, on risk management and the impact of financial fraud on economic growth; from 2016 to the present, on the search for methods and tools to detect and combat financial fraud. The spatial analysis confirmed a predominantly intercontinental connection between researchers. The comparison of subject areas demonstrated the interdisciplinary nature of the study, with a predominant focus on the fields of “computer science” and “economics, econometrics, and finance,” which is logical considering the economic nature and the ongoing technological transformation of financial fraud. The results can be utilized to develop new strategies, policies, and legislative initiatives to ensure financial integrity and increase confidence in financial systems. AcknowledgmentThis study is funded by the Ministry of Education and Science of Ukraine and contains the results of the projects No. 0123U101945 “National security of Ukraine through prevention of financial fraud and money laundering: War and post-war challenges”, 0121U109559 “National security through the convergence of financial monitoring systems and cyber security: Intelligent modelling of financial market regulation mechanisms” and by the Vega Agency No. 1/0638/23.

The global financial crisis that started in 2007 sparked several academic debates about the role that financial sector regulators played in the crisis and prompted policy reforms in the financial supervision architectures of several countries. This book focuses on the question of what accountability, independence, transparency and, more generally, governance mechanisms applicable to financial regulators can better contribute to building responsive, responsible and effective regulatory and supervisory frameworks that tackle the weaknesses of the pre-crisis regimes. It re-visits the concepts of accountability and independence of financial regulators as well as the main economic theories underlying financial services policy-making, in light of the crisis experience. In addition, it critically examines the post-crisis institutional frameworks of financial regulation and supervision in the EU, the US and Canada with a view to assessing whether the financial regulators of the post-global financial crisis era are well suited to effectively address the challenges and threats that global financial markets pose to the stability, integrity and good functioning of financial systems as well as to the protection of consumers, investors and society at large.Topics addressed in this volume include:- The theoretical foundations of accountability and independence in financial regulation after the crisis; - The influence of economic theory on the quality of financial regulation and supervision;- Accountability in the European Banking Union and the European System of Financial Supervision;- Post-crisis structures of financial regulation in the US and their impact on consumer/investor protection and financial stability;- The role of financial supervision architecture in the stability of the Canadian financial system. The contributors to this volume are economists, lawyers, political scientists and sociologists from both academia and practice. Therefore, this book will be highly relevant to scholars and practitioners in these areas.

In this article, the authors examine some effects of economic internationalization on state structures, especially in regard to the distribution of power and authority within federalist systems. Using an institutional rational choice model, they analyze changes in financial regulation and market structures in Germany and the United States. The focus is on the financial realm because of its high degree of internationalization and because, in both countries, financial markets and regulation have historically exhibited federalist traits. The findings indicate that internationalization has led to significant convergence in financial market structures and regulation across the two countries and that in each case this convergence has been accompanied by centralization of financial regulatory authority. Although both the German type of cooperative federalism and the U.S. model of competitive federalism proved to be vulnerable to the growing international pressures, the two countries took different paths of change that reflected differences in domestic institutions. Thus, the authors conclude that convergence is, and will likely remain, of a limited nature.

Contents: 1. The Political Economy of the International Monetary and Financial Systems Thomas Oatley and W. Kindred Winecoff PART I: STRUCTURE, POWER, AND THE GLOBAL FINANCIAL SYSTEM 2. Financial Roots of Hegemony, Cooperation, and Globalization Andrew C. Sobel 3. Political Economy of Currency Internationalization Hyoung-kyu Chey 4. The Political Economy of the Contemporary Dollar Standard Thomas Oatley 5. Global Imbalances and the International Monetary System Herman Schwartz 6. The Triffin Dilemma, the Lucas Paradox, and Monetary Politics in the 21st Century W. Kindred Winecoff 7. The Renminbi-Dollar Relationship: Politics and Economics of a Diminishing Issue Yale H. Ferguson 8. Absolute or Relative Gains? How Status Quo and Emerging Powers Conceptualize Global Finance Leslie Elliott Armijo and John Echeverri-Gent PART II: THE POLITICAL ECONOMY OF EXCHANGE RATES Core Theoretical Perspectives 9. Private Actor Exchange Rate Policy Preferences Stephanie Walter 10. Domestic Institutions and Exchange Rates David H. Bearce Regional Exchange Rate Systems 11. Exchange Rates In Transition Economies Jana Grittersova 12. Currency Unions in the Developing World Scott Cooper 13. The Political Economy of Exchange Rates in East Asia Hongying Wang PART III: GLOBAL FINANCE: CRISES AND REGULATION 14. Financial Crises and the Politics of Adjustment and Reform Thomas B. Pepinsky 15. Fixed Exchange Rate Regimes and Financial Markets as Sources of Macroeconomic Discipline Thomas D. Willett, Eric M.P. Chiu and Stefanie Walter 16. The Politics of Global Financial Regulation Kevin Young 17. Why Club Goods Proliferated in Investment Finance W. Travis Selmier II 18. Rethinking Financial Regulation: Risk, Club Goods, and Regulatory Fatigue Philip G. Cerny 19. The Gnomes of Zurich Meet the Dogs of War: Financial Leadership and Regulation, 1850-2013 Michael Lee PART IV: INTERNATIONAL MONETARY INSTITUTIONS 20. Financial Governance in a Globalizing World Richard W. Mansbach 21. IMF Programs: Participation, Implementation, and Effects Graham Bird and Dane Rowlands 22. In Lieu of an Anchor: The Fund and its Surveillance Function Bessma Momani and Kevin A. English 23. The EU and the Euro Michele Chang 24. Our (Gracious?) Benefactors: US, Japan, China and East Asian Monetary Relations Emmanuel Yujuico Index

Five countries became members of the Eurasian Economic Union – an international organization of regional economic integration. The Republic of Kazakhstan, the Russian Federation, and the Republic of Belarus signed the international Treaty in the city of Astana, Kazakhstan on May 29, 2014. The Republic of Armenia and the Kyrgyz Republic acceded to the Treaty later. Harmonized regulation of financial markets should be one of the initial areas of cooperation, with the aims of creating a single financial services market within the EAEU and ensuring non-discriminatory access to the national financial markets of each of the member states. The EAEU member states have already entered into the initial stage of developing the Eurasian common market in financial services. A considerable part of the work should be carried out by a supranational financial market regulation body, which is to be established by 2025 according to the EAEU Treaty. Such financial integration in the EAEU has only been in progress for a limited time period and many of the key steps are yet to be done. The existing national-markets development level is highly non-homogeneous and is in need of further development. In such circumstances, a relevant question related to the study of foreign experience arises. European Union started to form its single financial services market in 1973, and since then it has gained certain experience in financial markets integration. This research paper is dedicated to the issue of necessity and possibility of using the EU experience in the course of the EAEU Single market development. The issue will be addressed in terms of political, legal, academic, and practical aspects. The article is of a general, theoretical legal character, which is why emphasis will be placed on legal and doctrinal questions. Special attention will be paid to an analysis of the Eurasian Economic Union Treaty and its Protocols. The work will be based on the academic research and opinions of Russian and foreign authors.