Regulatory Failure Research Articles

Risk of regulatory failure of “risk-based regulation” while using enterprise risk management as a meta-regulatory toolkit

PurposeDebate is growing around the expansion of risk-based regulation. The regulation scholarship provides evidence of regulatory failure of the risk-based approach in different domains, including financial regulation. Therefore, this paper aims to provide cautionary evidence about the risk of regulatory failure of risk-based strategy in the financial regulation while using enterprise risk management (ERM) as a meta-regulatory toolkit.Design/methodology/approachBased on interview data gathered from 30 risk managers of banks and five regulatory personnel, combined with secondary data, this study mainly explores the challenges for meaningful use of ERM based self-regulation in regulated banks. The evidence helps to assess the risk of regulatory failure of the risk-based regulation while using ERM.FindingsThe evidence reflects that regulated banks face diverse challenges arising from both peripheral and internal environments that limit the true internalization of ERM-based self-regulation. Despite this, the regulator uses this self-regulation as a meta-regulatory toolkit under the risk-based regulation to achieve the regulatory aims. However, the lack of true internalization of ERM based self-regulation is likely to raise the risk of regulatory failure of risk-based regulation to achieve the regulatory goals. Risk-based regulation is an evolving strategy in the regulatory regime. Therefore, care should be taken while using ERM as a regulatory toolkit before relying on it substantially.Originality/valueThe paper provides empirical insights about the challenges for effective use of ERM as a meta regulatory toolkit that might be useful practically both to the regulators and regulated firms.

The Failed Regulation and Oversight of American Prisons

When the state incarcerates, it assumes an affirmative, non-negotiable obligation to keep people in prison safe and to provide for their basic needs. In the United States, the three branches of government—legislative, executive, and judicial—are in theory collectively responsible for making certain that this obligation is fulfilled. In practice, the checks and balances built into the system have failed to ensure even minimally decent carceral conditions. This review maps this regulatory failure. It shows that, in all branches of government, rather than policing prison officials, the relevant institutional actors instead align themselves with the officials they are supposed to regulate, leaving people in custody unprotected and vulnerable to abuse by the very actors sworn to keep them safe. This pattern is no accident. It reflects a palpable normative hostility and contempt toward the incarcerated, an attitude with deep roots in the virulent race hatred endemic to the American carceral project from its earliest days.

Financial institutions and anti-money laundering violations: who is to bear the burden of liability?

PurposeMoney laundering (ML) is one of the greatest challenges, the global community faces today. Corporate entities such as financial institutions (FIs) are most susceptible to facilitate and launder money. The paper raises the following question: Who is to bear the burden of liability? Either a corporation or an individual, thus this paper examines liability issues in a corporate setting particularly financial institutions, which arise from regulatory noncompliance or failure to oversight in the context of ML.Design/methodology/approachThe study is legal doctrinal mainly based on case laws, legislation and research articles.FindingsFirstly, this study provides how the concept of liability in a corporate setting in UK and USA has drifted from its traditional “duty to care” standard to a new “duty to oversight” and “Responsible Corporate Officer” concepts resulting a shift in corporate to individual liability. Secondly, in the context of anti-ML violations in FIs, imposition of corporate or personal liability solely may not effectively deter ML and may create conflicts between management and shareholders.Practical implicationsThe paper can be a source to explore the issue of ML liability for regulatory noncompliance based on UK, USA and Pakistan law.Originality/valueThis paper demonstrates that the imposition of either corporate or personal liability may create dilemma either for shareholders or management; however, a “combine or collective liability” approach carries potential to retard ML activities in FIs and balancing the harm-penalties incurred upon a corporation while addressing shareholders concerns.

Book review: On Feeding the Masses: An Anatomy of Regulatory Failure in China

Book review: On Feeding the Masses: An Anatomy of Regulatory Failure in China

Groping for Stones to Cross the River: Early Local Lessons from Three Effluent Pollution Cases in Hubei in the 1960s–1980s

This article uses local official archives of three effluent pollution cases in Hubei in the 1960s–1980s to examine early regulatory failures of industrial waste control. With many unpublished records of official responses, these effluent cases received first exposure in semi-public discourses, while public voices in Hubei protested against the pollution which arose because of the conflicting interests of industrial sectors. In defusing public pressures from pollution, local agencies continually interacted with intricate bureaucratic channels. Experiments with policy enforcement, still prevalent today, had created poor regulatory effects in containing illegal emission incidents initially and in regularising pollution penalties subsequently.

Regulation of Telecommunications: The Choice Between Market and Regulatory Failures

Abstract
 The paper examines the main regulatory frameworks of the telecommunications industry through the concept of market failure and analyses how and why the policy often leads to undesirable outcomes that might be considered as regulatory failure. The research uses the EU regulatory framework for electronic communications as a base for the analysis of the main policy objectives through the prism of the market failure theory with an eye to the interests of the main market players in the telecommunications markets. About any aspect of regulation allows to find ways to create opportunities for some groups of the industry and stifle activity of others. Despite the theory of market failure provides reasonable justifications for regulation of telecommunications markets, it is possible to argue that many of these problems are mainly the consequence of the policy and could be better solved by market mechanisms. The results of the research allow to look at the problems of telecommunications development and issues of the high level of concentration of the telecommunications markets as regulatory formed problems rather than consequences of the inherited industry’s characteristics.

The Vanishing Suburban Dream in Australia

Australia is the most suburbanised country on earth. The ‘Australian Dream’ of a house in the suburbs has long reflected the sense of entitlement that urban Australians have to the financial security, private space and amenity that the Dream promises. Since around the turn of the century, governments at every level have been attempting to arrest suburban sprawl for its negative social, environmental and economic impacts. However, neoliberal economic and planning environments have exacerbated regulatory failure, so attempts to create compact cities have done little to provide genuine alternatives to suburban life or address low-quality sprawl in newly built outer suburbs. Unrestrained house price inflation, assisted by an investor-friendly taxation regime, has led to a situation where the housing outcome, the Dream, enjoyed by previous generations is becoming impossible. Overlaying this is an ideological environment that pits the suburbs against the inner city as a battle in the ‘culture wars’ and serves to obliterate any nuance, diversity or possibility for progressive change into the public debate.

Designing Regulation Across Organizations: Assessing the Functions and Dimensions of Governance

AbstractIn recent years, regulation scholars and policymakers have increasingly turned their attention to the role of inter‐governmental organizational design in effective governance. The existing literature on regulatory design has provided important insights into the advantages and disadvantages of alternative structural options. This article synthesizes and builds on that literature by describing a novel framework for characterizing, analyzing, and structuring authority across public institutions. Drawing on examples from a range of jurisdictions, it highlights the value of this framework in identifying the values tradeoffs that should drive policymakers' decisions to choose among competing structural alternatives. The framework is founded on two important points. First, inter‐governmental allocations of authority can be structured along three different dimensions. Failing to appreciate the existence of, and differences among, these dimensions can prompt misassessments of the reasons for existing regulatory failures and selection of structural allocations that do not suit the problems intended to be addressed. Second, allocations of authority can, and in many cases should, vary for disparate governmental functions. Differential functional allocations of authority can minimize obstacles to needed structural reforms and tailor inter‐governmental relations in ways that best promote chosen regulatory values, such as efficiency, effectiveness, and accountability, as well as how allocational choices may and perhaps should vary depending on the governmental function being performed. Finally, the article suggests how future regulation and governance scholarship can harness this emerging framework to help build a body of empirical evidence upon which policymakers can draw in future regulatory design endeavors.

Hayek and the Texas blackout

Was the Texas blackout a market failure or regulatory failure? The economist Hayek has been adduced in support of both views. Hayek would have approved the competitive Texas system, including ERCOT. His likely view on the scarcity pricing framework is less clear, and the recent regulatory implementation of the “circuit breaker” was problematic. There is now a need to revise the scarcity pricing framework in the light of recent events, and to reflect ever-changing market conditions.

Socio-Economic Considerations and Potential Implications for Gene-Edited Crops

Regulatory clarity and efficiency are increasingly important for the successful commercialization of technologies resulting from public and private R&D investments. This article examines recent developments in the movement away from mostly science-based risk assessment regulatory and variety approval systems focusing on human and animal health and environmental safety to hybrid systems that include assessment of socio-economic considerations allowed for under the auspices of the Cartagena Protocol on Biosafety. We propose that socio-economic consideration assessments can be grouped into three methodological categories: empirically based, legally grounded and consensus approaches. Our exploration of developments in the three categories reveals gaps in data, consistency and methodology rigor, that must be addressed for efficient and reliable socio-economic consideration assessment. We assess the potential impacts of these gaps on the regulation of gene-edited crop varieties, concluding that if gene-edited crops are regulated as genetically modified crops, they will endure the same fate, that is, lengthy regulatory approval processes and failure to be commercialized. The end result being that the regulatory burdens in potential adopting and food insecure countries will prevent important new crop varieties from reaching farmers and producers for their use. https://doi.org/10.21423/jrs-v09i2ludlow

THE MIGRATION OF DOMESTIC WORKERS FROM THE PHILIPPINES TO THE UAE AND THE KAFALA SYSTEM

This paper examines the regulatory regimes surrounding the operations of intermediaries who facilitate Ethiopian women’s employment as contract domestic workers in the Middle East. Drawing on empirical research in Ethiopia, Lebanon, and Kuwait, the paper focuses on the commonly observed problem of “regulatory failure,” as states and international agencies frequently fail to achieve their objectives in the regulation of intermediaries of migration. This paper argues that a decentered approach to regulation can provide a productive diagnosis of regulatory failure, one that recognizes how power may be dispersed between social actors and (non-unitary) state actors and how it is differentially exercised across multiple regulatory regimes within this migration trajectory.

Vested Interests in Big Agriculture

Almost three decades of studying freshwaters in New Zealand has revealed to me that our lowland freshwater ecosystems are in dire straits and that there is no hint of improvement, or even a slowing of degradation. The leading cause of their demise is landuse change, specifically the rampant and extreme intensification of farming. The response of government, both central and local, has been an abject failure to limit this intensification and its resultant harm. Key to these regulatory failures by authorities charged with protecting freshwaters has been the influence at all levels of powerful agricultural industry lobby groups.

Regulatory Capture in Product Markets and the Power of Business Interests

This article explains pervasive regulatory failure, lagging productivity, and the corporate capture of policy and policymakers as possibly unintended, but not unpredictable, outcomes of the New Zealand Treasury’s radical adoption during the 1980s of public choice and Chicago school doctrines. With deregulation and a limited role of government written into statutes and embodied in regulatory practice, the pathologies identified and described by Buchanan, Tullock, Stigler and their collaborators became more, rather than less, prevalent in the New Zealand regulatory landscape. Privatisation opened the way for looting; the Commerce Act and new regulatory guidelines enabled rather than blocked anticompetitive practices and monopolistic renttaking; relaxed oversight meant that foreign direct investment became more extractive and less productive. From relatively inclusive politics and strong regulatory enforcement, New Zealand shifted towards more extractive institutions and weaker regulation. As a result, market power is exercised by the current business and financial elite in ways that have worsened wealth and income distributions, imposed deadweight burdens (both static and dynamic) on the economy, and now confront policymakers with roadblocks to achieving more inclusive institutions and pursuing a ‘wellbeing’ agenda.

Assimilable organic carbon cycling within drinking water distribution systems

A new conceptual model to describe and understand the role of assimilable organic carbon (AOC) within drinking water distribution systems is proposed. The impact of AOC on both drinking water biofilm and water quality was studied using bespoke pipe loop experimental facilities installed at three carefully selected operational water treatment works. Integrated physical, chemical and biological monitoring was undertaken that highlights the central role of biofilms in AOC cycling, forming the basis of the new conceptual model. Biofilms formed under high AOC conditions were found to pose the highest discoloration response, generating a turbidity (4.3 NTU) and iron (241.5 µg/l) response sufficient to have caused regulatory failures from only 20 m of pipe in only 12 months of operation. This new knowledge of the role of biofilms in AOC cycling, and ultimately impacts on water quality, can be used to inform management and help ensure the supply of high-quality, biostable drinking water.

Marx, Foucault, and state–corporate harm: a case study of regulatory failure in Australian non-prescription medicine regulation

Risk-based regulation has underpinned Australian prescription and non-prescription medicine regulation for over three decades. However, data consistently demonstrate high rates of non-compliance among non-prescription medicine sponsors, with most breaches a result of inappropriate labelling and advertising, a lack of evidence to substantiate therapeutic claims, and product formulation and manufacturing. This paper seeks to understand why the regime fails to achieve compliance from non-prescription medicine sponsors. Using a state–corporate harm lens, and Marxist and Foucauldian perspectives, it is argued that regulatory failure is the product of the regime’s congruence with neoliberal governmentality. This governmentality is inextricably linked to a neoliberal market hegemony that attempts to minimize forms of market intervention detrimental to the accumulation of capital.

Energy Network Innovation for Green Transition: Economic Issues and Regulatory Options

In this age of low-cost capital and stimulus packages, is it the best time to heavily invest in tomorrow’s energy networks and research infrastructure? In the academic literature it is widely acknowledged that innovation is key to decarbonising the energy sector and fostering sustainable development. However, post liberalisation has been struggling to promote R&D and innovation. Is this a case of business, regulatory, or policy failure, or are there other factors involved? In this paper, we discuss the reasons for slow uptake of new technologies in energy networks and propose some remedies for the European context, where innovation in the area of energy networks is crucial for the implementation of the Green Transition. The solutions to address this shortfall need to be considered in an overarching manner. The specific points raised here are based on incentive regulation, the establishment of competitive funding models like Ofgem’s Low Carbon Network Fund, and a large European collaborative research hub.

The Failure of Corporate Governance at Infrastructure Leasing and Financial Services Limited: Lessons Learnt

This case study investigates multiple issues related to corporate governance, regulations, auditing and financial reporting of Infrastructure Leasing and Financial Services Limited (IL&FS). Combinations of these issues resulted in default in payment obligations by IL&FS in August 2018 originated from the agency problem. It posed a substantial systematic risk to the whole financial system of India. This case study highlights the severe drawback of concentration of decision-making and unprofessional work ethics at the senior management level. Further, the case study also provides the opportunity to discuss the inappropriate regulations and governance practices which cause a severe problem in long-standing and prominent organizations like IL&FS. Research Questions: (a) Discuss the vital role of corporate governance in major corporations and the reasons behind governance failures. (b) How did asset–liability mismatch create liquidity problems in a company which deals with long-term projects? (c) How does lack of a proper and unified regulatory framework for Non-Banking Financial Corporation (NBFC) harm investors’ interest? Link to Theory: This case study provides an opportunity to learn the role of corporate governance in NBFC. This case demonstrates the problems arisen because of agency problem and conflict of interest among real-world stakeholders. The case study also highlights the importance of assets–liabilities management in a strategically important organization like IL&FS. Phenomenon Studied: This case study attempts to understand the potential problems that occurred in IL&FS from the failure of good governance, lack of unified regulations for NBFCs and non-adherence of professional responsibilities by the external auditors. Case Context: The case study explores the vital role of the infrastructure development and financing companies in developing economies like India and how it may affect other vital entities of the financial system. Further, it demonstrates how unethical practices at senior management and lack of unified regulations can harm the organization. Findings: The research study found senior management’s potential involvement in unethical practices while managing the company. The financial statements did not reflect the true and fair picture of the entity, which misled investors and other stakeholders. It created chaos in the stock market, resulting in a loss to shareholders. The government set up a new board to restore the confidence of the stock market. Further, the government started to address the problems that arose. Discussions: The case of IL&FS by default, at first glance, looks like a case of asset–liability mismatch due to the lack of supervisory roles of the board and senior management’s massive regulatory failure. It is shocking how under the nose of regulators like Reserve Bank of India (RBI), Securities and Exchange Board of India (SEBI) and Ministry of Corporate Affairs (MCA) a default of this scale could take place. How could IL&FS group grow unchecked into a massive 348 entity. It appeared that regulators, marquee shareholders (banks and institutions), and the board of directors failed in their fiduciary obligation to regulate and supervise IL&FS.

Complement Activation in the Central Nervous System: A Biophysical Model for Immune Dysregulation in the Disease State.

Complement, a feature of the innate immune system that targets pathogens for phagocytic clearance and promotes inflammation, is tightly regulated to prevent damage to host tissue. This regulation is paramount in the central nervous system (CNS) since complement proteins degrade neuronal synapses during development, homeostasis, and neurodegeneration. We propose that dysregulated complement, particularly C1 or C3b, may errantly target synapses for immune-mediated clearance, therefore highlighting regulatory failure as a major potential mediator of neurological disease. First, we explore the mechanics of molecular neuroimmune relationships for the regulatory proteins: Complement Receptor 1, C1-Inhibitor, Factor H, and the CUB-sushi multiple domain family. We propose that biophysical and chemical principles offer clues for understanding mechanisms of dysregulation. Second, we describe anticipated effects to CNS disease processes (particularly Alzheimer's Disease) and nest our ideas within existing basic science, clinical, and epidemiological findings. Finally, we illustrate how the concepts presented within this manuscript provoke new ways of approaching age-old neurodegenerative processes. Every component of this model is testable by straightforward experimentation and highlights the untapped potential of complement dysregulation as a driver of CNS disease. This includes a putative role for complement-based neurotherapeutic agents and companion biomarkers.

TOTAL QUALITY MANAGEMENT IN MOROCCAN UNIVERSITIES : READING IN THE REALITY OF PRACTICE IN THE LIGHT OF INTERNATIONAL EXPÉRIENCES

In Morocco, there is a crisis that has not yet found its way to serious and decisive treatment, which is the output crisis of the higher education system. Though the successive public policies seek to contain correctional projects and initiatives, they have not made the difference, and have not set out effective and efficient tracks in developing mechanisms for evaluation, development and reconstruction, to produce educational and learning outputs that contribute to the real takeover of the State's development aspirations. The weak capacity of Moroccan universities to respond rapidly to the global, economic, cultural and technological variables imposed by globalization and securing the conditions for social, economic, political and security stability of the state, requires bypassing through advanced science-based treatment of quality and value of achievement. The issue of total quality management in higher education institutions may be raised by including international experiences that have succeeded to curb the regulatory and administrative failure of its educational institutions, to enhance the chances of Moroccan universities to transfer higher education in Morocco from traditional measure to modern measure by applying quality control standards in management, planning and implementation, in accordance with a strategy that is supported by the State and the University.

Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing

Fee-based Buy-Now-Pay-Later services (BNPL) are becoming widely adopted in many developed countries, including Australia. Across a variety of regulatory approaches there appears to be relatively minimal regulatory coverage of fee-based BNPL. This review applies a results-oriented, behaviourally informed market failure approach to assess the regulatory outcomes of fee-based BNPL. The review makes the case that the impacts of the regulation of fee-based BNPL in Australia demonstrate multiple forms of regulatory failure. The regulatory failure is particularly due to regulatory capture at a broad level and especially in terms of a lack of consumer protections. Consumers may particularly need consideration and protection because understanding the increasing complexity and financial knowledge at the heart of many fintech services is beyond the capability or responsibility of the consumer. Incorporating social and consumer considerations into analyses of regulatory structures can enable analyses of the regulation of fintech and move financial services regulation toward providing more socially useful and sustainable financial services. In the future, a behaviourally informed approach to the regulation of fintech may be beneficial and enhance sustainability.