Structure Of Financial Regulation Research Articles

International Experience and Reference of China's Financial Regulatory System Reform

Since the 1970s, in order to reduce financial risks in the context of fast-paced growing financial industry, China has been implementing reforms to its financial regulatory structure. In 2023, the State Administration for Financial Supervision and Administration was officially established, bringing China closer to mixed industry regulation. Currently, there are multiple types of financial regulation on a global scale, including segmented regulation, single regulation, functional regulation, and bimodal regulation. Given the rapid development of China's financial market, it is imperative to draw on better international expertise, innovate domestic regulatory framework, and persist pursuing bimodal regulatory mode under the mixed industry background. By implementing the bimodal regulation of macro prudential regulation and micro behavioral regulation, China is managing to control financial risks, protect investors lawful rights and interests, and foster the long-term and stable expansion of China's financial industry

An Analysis on the Proposed Reforms to the Financial Regulatory Structure Outlined in the Report of the Presidential Taskforce on Parastatal Reforms in Kenya

An Analysis on the Proposed Reforms to the Financial Regulatory Structure Outlined in the Report of the Presidential Taskforce on Parastatal Reforms in Kenya

Assessing COVID Impacts, Sustainable Finance, Current and Future Implications for Banks and Monetary Policy: 'Breaking the Tragedy of the Horizon, Climate Change and Financial Stability'

The implications of COVID developments for monetary policy will certainly extend beyond the increased use of digital platforms and payments. The current environment is also focused on smart green techniques and green initiatives aimed at promoting a transition to a net zero based carbon emissions economy. During the onset of the pandemic, it was initially thought that carbon emissions would fall drastically – given the impact of the pandemic, not only on the airlines industry, but also as a result of “Stay at Home” measures imposed by jurisdictions, which even made it illegal to drive to certain places, where purposes for doing so were unjustified. However, the pandemic has also witnessed unprecedented levels in digital subscriptions, online sales and marketing – also fueled through digital payments and the use of digital platforms and distributed ledger technologies in facilitating cashless payments – cash, namely bank notes and coins, also being considered to be a medium of COVID transmission. Coupled with attributes such speed, convenience and ease, the need for financial inclusion has also become an objective in facilitating the era of innovative digital means of payments.As well as considering the current implications of measures that have been instigated to address the impacts of the pandemic, drawing from past and current lessons from selected jurisdictions, this paper also considers why the transition to a net zero carbon economy may prove more challenging than may first appear. However, jurisdictional differences and historical developments will play a part in determining how sustainable certain implemented policies and measures are – as well as in facilitating a transition to normality.This presentation will seek to demonstrate that depending on the structure of financial regulation which operates in different jurisdictions, as well as whether common law principles of tort law apply in these jurisdictions in addressing liability risks, it will be feasible, realistic and possible to break the tragedy of the horizon.

Is Hong Kong a potential role model for objectives-based financial regulation?

... Should Hong Kong radically change the core of its financial law—putting in place a Twin Peaks financial regulatory structure? Unlike traditional regulatory structures, these Twin Peaks structures consolidate regulatory power over the financial system in two government bodies. The first body deals with macro-prudential regulation—making sure that economic regulations contain risks and minimize the likelihood of financial crises and gross inefficiencies.1 The second ‘twin’ focuses on policing market behaviour—such as controlling insider trading and so forth.2 The global financial crisis in 2007–2008, and the widespread drop in securities prices in the developed world, led several jurisdictions’ governments to consider alternative methods of regulation. Discussions about a move toward a Twin Peaks regulatory model in the United States—and the actual design of the UK’s regulatory framework putting in place such a structure—illustrate the widespread interest in such regulatory structures.3 While scholars and practitioners alike recommended that jurisdictions like the UK adopt such Twin Peaks regulatory structures, the case for such a radical rewrite of its financial law is much less clear for jurisdictions like Hong Kong—which did not suffer from the 2008 crisis in the same way. In places like Hong Kong, the costs of adopting objectives-based financial regulation—particularly regulation putting in place a Twin Peaks financial regulatory structure—seem to outweigh the benefits. Is this true? In this article, we illustrate a broader question in legal theory using a specific case—namely whether Hong Kong should move toward a Twin Peaks financial regulatory approach. We use the city-state to assess how objectives-based legislation might provide a new paradigm for creating and organizing regulatory agencies.4

규제가치 최적화를 위한 금융규제 체계의 구성과 정책적 시사점

규제가치 최적화를 위한 금융규제 체계의 구성과 정책적 시사점

Over-the-Counter Derivatives Regulation in Hong Kong and Singapore

Abstract In this article, Dr Christopher Chen examines and compares the regulation of over-the-counter derivatives in Hong Kong and Singapore, the two largest international financial centres in Asia Pacific. Dr Chen analyses current or proposed regulations on trade reporting, centralised clearing and mandatory exchange trading mandates regarding OTC derivatives against the backdrop of reforms of international financial regulatory structure after the global financial crisis. The article also relates the reforms in Asia to development in major Western markets such as the U.S., U.K. or European Union. Apart from technical comparison and dissecting of content of rules from different angles, this article also examines the rationale behind those reforms and policy concerns behind Asian adoption of the regulatory mandates prescribed by G20 as well as potential policy concerns (such as competition and extraterritoriality) in a market that is dominated by Western banks.

Delegating Regulation: European Union and Financial Markets

This paper analyzes the design of financial regulatory structure in the European Union. We develop a two-pronged approach to track changes in decision-making authority in EU financial market regulations and directives enacted from 1964 to the present. Traditional observational data collection methods manually code laws to identify the amount of discretionary authority delegated to regulatory bodies that oversee segments of financial markets. The lack of robustness and scalability of this approach, however, may limit the generalizability of observational studies. To remedy these potential shortcomings, we match observational methods with data science techniques, in particular natural language processing, to visualize complex patterns in the text of laws and temporal movements. The combination of both observational and computational approaches provides more detailed insights of the various elements of financial regulatory structure and the temporal allocation of decision-making authority among the European Commission, regulatory agencies and the Members States. Our analysis indicates that both the scope and location of decision-making authority shifted over time, moving from Member States to EU regulatory agencies. The amount of discretionary authority delegated to EU agencies to implement regulations, on the other hand, has remained largely unchanged.Issue editors: Françoise Roure and Serge Catoire

Overhauling the institutional structure of financial regulation in Nigeria: The unfinished reform

In recent years there have been calls for reforms to the institutional structure of bank regulation in Nigeria. It is argued these reforms are needed in order to strengthen the banking sector so that it can continue to play a key role in boosting economic development in Nigeria. To this end, this article analyses different arrangements for the institutional structure of bank regulation and maintains that bank supervision should be retained within the central bank. It further advocates a total restructuring of the institutional edifice of financial regulation with the view that the Twin-Peaks approach to financial regulation is the most advantageous institutional structure for financial sector regulation in Nigeria. There are merits and demerits with each of the different institutional structures but the strengths of Twin Peaks make it the optimal institutional structure for financial regulation in Nigeria.

Data Science and Political Economy: Application to Financial Regulatory Structure

The development of computational data science techniques in natural language processing and machine learning algorithms to analyze large and complex textual information opens new avenues for studying the interaction between economics and politics. We apply these techniques to analyze the design of financial regulatory structure in the United States since 1950. The analysis focuses on the delegation of discretionary authority to regulatory agencies in promulgating, implementing, and enforcing financial sector laws and overseeing compliance with them. Combining traditional studies with the new machine learning approaches enables us to go beyond the limitations of both methods and offer a more precise interpretation of the determinants of financial regulatory structure.

Financial Regulatory Structure and the Resolution of Conflicting Goals

The debate over modernizing the financial structure is raising questions about the merits of modernizing the financial regulatory structure. Regulatory structure is important because an almost unavoidable feature of our current system of government is that Congress assigns multiple goals that sometimes have conflicting policy implications to the regulatory agencies. The structure of the agencies is important to the resolution of these conflicts. Responsibility for two or more goals that have conflicting implications may be assigned to a single agency that is likely to resolve the conflict with a consistent set of policies based on the agency's priorities. Alternatively, the goals may be assigned to more than one agency, an action that often results in the conflicts being debated in the public arena but that may also result in the agencies' implementing inconsistent policies. This paper uses the problem of goal conflicts to provide a framework for evaluating alternative regulatory structures.

The United Kingdom's Response to Crisis: A Critical Examination of the New Regulatory Structure of Financial Services Supervision.

The 2008 economic turmoil, which greatly affected the UK, led to the realisation that there had been a missing link in the overall structure of financial regulation. Thus, within days of coming into power, the Coalition Government announced its plans for an extensive overhaul of the regulatory structure of financial services supervision and put forward an ambitious programme for reform, hoping to restore public confidence. The UK’s official response is enunciated in the Financial Services Act 2012, which came into force on the 1st of April 2013. The new legislation has resulted in the split of the Financial Services Authority (FSA) into two separate authorities, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), while a new committee, the Financial Policy Committee (FPC), has been established within the Bank of England (BoE) in order to perform macro-prudential oversight functions. This paper focuses on this very change of the regulatory architecture in the UK. It aims to critically examine its implications in order to reach a conclusion on whether the new regulatory framework is indeed what the UK needs to restore its financial stability. It will attempt to analyse whether this alteration of the regulatory framework is capable of handling future challenges posed by the ever-evolving commercial realities of the global financial markets.

Financial Regulatory Reform: A Progress Report

The 2007-09 financial and economic crisis was the result of a lack of effective regulation. The author addresses the problems with regulations in effect at the time of the crisis and offers proposals for regulation reform to address future crises. He notes that reforms should be based on solid principles, including reduction of system risk and contagion and increased transparency to promote investor protection. Any new financial regulatory structure must be able to achieve these goals, while acknowledging and managing trade-offs between enhancing accountability and mitigating systemic risk from contagion.

Banking, finance, and the role of the state

This paper provides an overview of the issue. It considers the existing structure of financial regulation, the deficiencies that were encountered during the financial crisis, and the proposed reforms. It discusses whether these are likely to be adequate and argues that there are fundamental failures in product markets, capital markets, and government relations with financial institutions highlighted in the articles in this issue that question whether current reforms will prove sufficient. In particular, the article argues that a clearly defined partnership between the state and the banking system needs to be established by which the state protects certain core components of the banking system that perform key functions in an economic system and well specified rules are put in place to avoid renegotiation and lobbying. Copyright 2011, Oxford University Press.

United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act

United States Securities Regulation and Foreign Private Issuers: Lessons from the Sarbanes-Oxley Act

The US government dual banking regulation levels, transaction costs and HSBC's strategy in acquiring Marine Midland Banks, Inc., 1978–80

This paper undertakes a case study of HSBC acquiring Marine Midland Banks, Inc. (MMBI) in the US between 1978 and 1980, a historic incident that had a catalytic impact on the whole debate about foreign banking in the US and re-examination of the restrictions on the US banks' inter-state operations. This paper explores the impact of the US government's financial regulatory structure on HSBC's acquisition and how HSBC dealt with difficulties caused by the US government regulations. We find that the structure of the US government financial regulation caused political hazards which further influenced HSBC's contractual hazards and business transaction costs. We have established that the different attitudes of the federal and state regulatory authorities toward HSBC's acquisition were closely related to their interests, regulatory capability and resources. Our analysis also confirms that HSBC's commitment strategy did help it to earn the federal regulatory authorities' support and MMBI's cooperation, which facilitated the conversion of Marine Midland Bank (MMB), a principal subsidiary of MMBI, to the status of a national chartered bank and allowed HSBC to circumvent the NYBD's regulation.

Financial Turmoil in the Banking Sector and the Asian Lamfalussy Process: The Case of Four Economies

This paper investigates the prevailing financial regulatory structures and impact of the current financial turmoil on banking performance in four Asian economies: the People's Republic of China (PRC); Hong Kong, China; Singapore; and Taipei, China. Both the PRC and Hong Kong, China operate under a fragmented financial regulatory structure, while Singapore and Taipei, China have integrated structures. We examine the role of an integrated financial regulatory structure in helping financial institutions mitigate the impact of the financial crisis, using financial indicators of banks’ capital structure and operating performance in these four economies between 2003 and 2008. Our analysis of the indicators reveals that banking performance under a fragmented financial regulatory structure is not worse than under integrated regulation. This implies that financial regulatory structure is not the main reason why Asian financial institutions suffered only limited losses from the current global financial crisis. However, given the growing complexity of the global financial system, and the relative weakness of current financial regulatory structures in Asia, this paper suggests that East Asian governments should refer to the Lamfalussy Process in the European Union and set up an Asia Financial Stability Dialogue to facilitate policy coordination for regional financial sector stability and development.

Markets: The Credit Rating Agencies

This paper will explore how the financial regulatory structure propelled three credit rating agencies—Moody's, Standard & Poor's (S&P), and Fitch—to the center of the U.S. bond markets—and thereby virtually guaranteed that when these rating agencies did make mistakes, these mistakes would have serious consequences for the financial sector. We begin by looking at some relevant history of the industry, including the series of events that led financial regulators to outsource their judgments to the credit rating agencies (by requiring financial institutions to use the specific bond creditworthiness information that was provided by the major rating agencies) and when the credit rating agencies shifted their business model from “investor pays” to “issuer pays.” We then look at how the credit rating industry evolved and how its interaction with regulatory authorities served as a barrier to entry. We then show how these ingredients combined to contribute to the subprime mortgage debacle and associated financial crisis. Finally, we consider two possible routes for public policy with respect to the credit rating industry: One route would tighten the regulation of the rating agencies, while the other route would reduce the required centrality of the rating agencies and thereby open up the bond information process in way that has not been possible since the 1930s.

Institutional Structure of Financial Regulation in China: Lessons from the Global Financial Crisis

In light of the recent global financial crisis, this article aims to critically examine China's financial regulatory structure and, based on the results of such examination, set out reform proposals for China. At present, China adopts a traditional sectoral system of financial regulation, which has exhibited several inadequacies in meeting the regulatory challenges in a rapidly changing market. In quest of a solution to the problem, a comparative analysis is conducted of the financial regulatory regimes in some advanced economies, including the US, the UK and Australia, each of which is representative of a distinct regulatory model. When looking to these overseas experiences for guidance, regard is taken not only of their objective advantages and disadvantages, but also of the local conditions in China. It is concluded that the US model merits consideration in the short term and, with the further growth of China's financial markets in the long run, the Australian model provides the preferred direction for reform over the UK model.

The Subprime Crisis—Some Thoughts on a "Sustainable” and “Organic” Regulatory System

The Nation is now in the midst of one of the greatest financial crises in its history. Much of the blame for this condition is being placed on the bursting of the residential real estate bubble, which was fueled in large part by the reckless expansion of subprime mortgage lending. Those mortgages began defaulting in droves as the Federal Reserve Board drove up interest rates, causing massive losses at Bear Stearns, Lehman Brothers, Morgan Stanley, Citigroup, Wachovia, Washington Mutual, Countrywide Financial Group, American International Group and Merrill Lynch, to name a few. Those losses were shocking but paled in comparison to the failures of Lehman Brothers and Bear Stearns and the placing of Freddie Mac and Fannie Mae into conservatorship. Massive bailout packages for the financial service firms failed to restart lending, the country slipped into recession and unemployment soared. The subprime crisis had other ripple effects. The Dow Jones Industrial average was down 47 percent on February 19, 2009 from the high of 14,087 that was reached on October 1, 2007. This devastated retirement savings, college and other endowments, and every other investor in the market.On the other side of the equation were the subprime borrowers. They too were devastated by the subprime crisis as their adjustable rate mortgages (which had been originally issued at low teaser rates) reset at unaffordable levels. Foreclosures became an epidemic in many communities across the country, Florida being one of the worst centers for those sad events. Hispanics were also a particular target for subprime lenders. Hispanic homeownership in the United States grew by 47 percent between 2000 and 2007, compared to an overall homeownership increase of 8 percent. Tellingly, that growth was fueled by the fact that some 47 percent of mortgage loans to Hispanics were subprime and many of those loans are now being foreclosed. The African-American community has also been hard hit by the subprime crisis. Over one half of mortgage loans to African-Americans in 2006 were subprime, and they too are facing massive foreclosures. These problems have been blamed on flaws in the financial regulatory structure, and Congress has now begun the process of restructuring that regulation. This Article discusses the subprime mortgage market and the flaws in the financial system that led to the present crisis, and it will then provide some suggestions on regulatory reform.

Treasury department's proposed overhaul of the financial regulatory structure: a look at the blueprint and a look ahead

PurposeThe purpose of this paper is to summarize and provide commentary on the US Department of Treasury's Blueprint for a Modernized Financial Regulatory Structure, issued on March 31, 2008.Design/methodology/approachThe paper summarizes and comments on the short‐, intermediate‐, and long‐term recommendations laid out in the Blueprint. The short‐term recommendations are to modernize the President's Working Group on Financial Markets, principally by broadening its focus to include the entire financial sector; to address gaps in mortgage origination oversight, principally though creating a federal Mortgage Origination Commission; and to enhance the Federal Reserve Board's current temporary liquidity provisioning process. The Treasury's intermediate‐term recommendations are intended to modernize the regulatory structure and to eliminate duplication. They are to phase out and transition the thrift charter to the national banking charter; to merge the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC); to establish a uniform, comprehensive regulatory system for, and create a federal charter for, “systemically important” payment and settlement systems; and to create an optional federal charter for insurers. The Blueprint's long‐term optimal regulatory structure envisions an “objectives‐based” regulatory approach in which three primary regulators would be established to focus individually on market stability regulation, prudential financial regulation and business conduct; three types of charters for financial institutions: federal insured depository institutions, federal insurance institutions, and federal financial services providers; the Federal Reserve Board assuming the role of market stability regulator; a prudential federal regulatory agency to regulate financial institutions with some type of explicit government guarantee associated with their business operations; and a conduct‐of‐business regulatory agency to regulate the business conduct of all financial institutions. In addition to the three objectives‐based regulators, the Blueprint recommends establishing two other regulatory entities: a federal insurance guarantee corporation and a corporate finance regulator.FindingsThe Blueprint finds that substantial regulatory reform is necessary to respond to significant developments including globalization of the capital markets, innovative and sophisticated new financial products and trading strategies, growing institutionalization of the capital markets, and convergence of financial service providers and financial products. Among the areas where one may see action and debate in the near future are: broadening the scope and membership of the President's Working Group on Capital Markets, adoption of uniform minimum licensing standards and the creation of a mortgage origination commission, further discussion of the terms and conditions attached to non‐depository institutions' access to the Federal Reserve discount window, continuing debate around the possible merger of the SEC and the CFTC, and updating by the SEC of the self‐regulatory organization (SRO) rule‐making process.Originality/valueThe paper is a clear and concise summary with commentary from expert securities lawyers.