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Capital adequacy regulation and financial conglomerates

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  • Mälkönen, Ville

Abstract

A topical concern in public-policy debate is that the current capital adequacy regulation designed for stand-alone financial institutions exhibits several weaknesses due to the emergence of large financial institutions combining several activities under common control.This paper addresses these concerns using a theoretical framework derived from the economic literature.I will first describe the possible causes of the emergence of financial conglomerates, proceed to consider the theoretical background for the regulation of financial institutions, especially insurance and banking companies, and, finally, examine the limitations of the current regulatory framework in controlling the risks in financial conglomerates.My conclusions provide little support for the view that the regulatory approach should be modified towards a more consolidated one (ie harmonization).

Suggested Citation

  • Mälkönen, Ville, 2004. "Capital adequacy regulation and financial conglomerates," Bank of Finland Research Discussion Papers 10/2004, Bank of Finland.
    • Handle: RePEc:zbw:bofrdp:rdp2004_010
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    More about this item

    Keywords

    banking; capital adequacy regulation; insurance; financial conglomerates;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies; Actuarial Studies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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