By Carlos A. Peláez, Carlos M. Peláez
Because the monetary trouble engulfs the realm financial system, there's an ambitous time table for regulatory reform. This booklet presents a accomplished evaluate of the research of finance, economics and the legislations and economics, illuminating earlier and present banking and monetary rules designed to avoid one other credit/dollar challenge and international recession.
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Extra resources for Regulation of Banks and Finance: Theory and Policy after the Credit Crisis
The checks and balances of the COSR are more realistic than the assumption of a benevolent planner. The pricing method diminishes the possibility of bankruptcy of the firms. The capital formula creates a long-term commitment of the firm or industry. An important objective of the theory of regulation, according to Laffont (Ibid, 510), is to incorporate the notion that regulators are limited by the lack of information on the regulated firms. The theory of regulation shifted with its reformulation as an agency problem with stress on the role of asymmetries of information and the use of incentive theory.
French and English law systems are the more widely used. The French legal system originated in the Napoleonic codes designed to implant the will of the state in reaction to the corruption of judges. The English system crystallized during the Glorious Revolution at the turn of the seventeenth century that ended the confiscation by the Crown and protected property rights by the separation of powers, restricting expropriation by the state. North and Weingast (1989) analyze the external economies of protection of property rights of government creditors that led to development of banking because of similar protection of the rights of private creditors.
According to this view, the fundamental welfare theorems asserting that competitive markets are efficient do not provide any guidance on financial markets that produce, process, disseminate, and use imperfect information. There are conceivable forms to improve efficiency by means of government intervention in financial markets. Market failure originates in costly information. Information is more important in financial markets than in those of goods. According to Stiglitz, information is a public good.