A critical analysis of the rationale for financial regulation part I : theories of regulation

Abstract

On a European and United States (‘US’) basis, after the 2008 financial crisis various regulatory and supervisory measures were taken to address weaknesses in the financial system identified. Today we are experiencing a process of re-regulation where most regulation adopted as a result of the crisis is being reconsidered. In this respect it seems that whilst the European Union (‘EU’) is reviewing the current framework to address regulatory gaps and enhance proportionality the United States has initiated a process of de-regulation. To comprehend the forces that drive financial regulation, it is always beneficial to analyse the theoretical framework that accounts for its origins and rationale. It is also important to critically examine the continued validity of the objectives which financial services regulation aims to achieve in practice.