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Financial Regulation After the Crisis

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  • Domenica Tropeano

Abstract

I critically discuss the main points in the financial reform legislation passed in the United States in 2010, with the adoption of the Dodd-Frank Act, and the planned reform proposals that are currently being drafted and discussed in the European Union. The general philosophy behind both reforms is similar. The inspiring idea is that financial innovation must be encouraged because it increases consumers' welfare and, by summing across all individuals, the whole of society's welfare. All the effort is concentrated in redesigning the regulatory and supervisory tools to deal with the whole range of new products and to be able to more accurately measure the risks arising from them than was done in the past. Once banks are ready to face those new risks, financial stability should follow. No structural measures aimed at changing the structure of financial markets or changing the business strategies of banking and nonbanking firms have been considered. The shadow banking system has not been explicitly addressed in the financial reform. Curiously enough, in the United States, regulators have succeeded in including a watered-down version of the Volcker rule in the approved reform, even though banks' share of the financial system's total activities is falling. On the contrary, in Europe, where banks are less disintermediated and have managed to reach leverage ratios higher than in the United States, no effort is planned to change their business strategy and to lower their leveragse.

Suggested Citation

  • Domenica Tropeano, 2011. "Financial Regulation After the Crisis," International Journal of Political Economy, Taylor & Francis Journals, vol. 40(2), pages 45-60.
  • Handle: RePEc:mes:ijpoec:v:40:y:2011:i:2:p:45-60
    DOI: 10.2753/IJP0891-1916400203
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    Cited by:

    1. Elayan, Fayez A. & Aktas, Rafet & Brown, Kareen & Pacharn, Parunchana, 2018. "The impact of the Volcker rule on targeted banks, systemic risk, liquidity, and financial reporting quality," Journal of Economics and Business, Elsevier, vol. 96(C), pages 69-89.
    2. Elise Kremer & Bruno Tinel, 2022. "Contingent convertible bonds and macroeconomic stability in a stock‐flow consistent model," Metroeconomica, Wiley Blackwell, vol. 73(4), pages 1112-1154, November.
    3. Hassan Bougrine & Mario Seccareccia, 2013. "Rethinking banking institutions in contemporary economies: are there alternatives to the status quo?," Chapters, in: Louis-Philippe Rochon & Mario Seccareccia (ed.), Monetary Economies of Production, chapter 10, pages 134-159, Edward Elgar Publishing.
    4. Szymon Okoń, 2012. "New Approach to Remuneration Policy for Investment Firms: a Polish Capital Market Perspective," Contemporary Economics, University of Economics and Human Sciences in Warsaw., vol. 6(1), March.
    5. Elisabetta Montanaro, 2023. "La vigilanza bancaria. Storia, teorie, prospettive di Lorenzo Esposito e Giuseppe Mastromatteo: un articolo di recensione (La vigilanza bancaria. Storia, teorie, prospettive by Lorenzo Esposito and Gi," Moneta e Credito, Economia civile, vol. 76(302), pages 133-153.
    6. Tropeano, D., 2013. "Financial Fragility in the Current European crisis," CITYPERC Working Paper Series 2013-09, Department of International Politics, City University London.
    7. Ilias Anthopoulos & Christos N.Pitelis, "undated". "The Nature, Performance, Economic Impact and Regulation of Investment Banking," Working papers wpaper137, Financialisation, Economy, Society & Sustainable Development (FESSUD) Project.
    8. Meier, Samira & Rodriguez Gonzalez, Miguel & Kunze, Frederik, 2021. "The global financial crisis, the EMU sovereign debt crisis and international financial regulation: lessons from a systematic literature review," International Review of Law and Economics, Elsevier, vol. 65(C).

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