Edited by Andrew W. Mullineux and Victor Murinde
* Richard Dale and Simon Wolfe 1 INTRODUCTION Several recent developments – notably, the breakdown of traditional distinctions between diﬀerent types of ﬁnancial activity, the globalization of ﬁnancial markets and increasing emphasis on systemic stability as a regulatory objective – have prompted policy makers to search for an ‘optimum’ regulatory structure that is adapted to the new market environment. Further impetus has been given to this debate by the radical overhaul of regulatory structures, along quite diﬀerent lines in the UK, Australia, Japan, the United States and New Zealand.1 This chapter examines alternative ways of organizing the regulatory function in the context of the new ﬁnancial market environment. Section 2 reviews the objectives, targets and techniques of regulation; Section 3 describes the new market environment and the restructuring of the ﬁnancial services industry; Section 4 assesses the implications of this new environment for the structure of regulation; Section 5 addresses the international dimension; and the ﬁnal section provides a summary and conclusion. 2 OBJECTIVES, TARGETS AND TECHNIQUES OF REGULATION Objectives of Regulation The case for regulating ﬁnancial institutions can be made on three broad grounds. First, there is the consumer protection argument. This is based on the view that depositors and investors cannot be expected to assess the riskiness of ﬁnancial institutions they place their money with, or to monitor eﬀectively the standard of service provided by such institutions. The consumer protection rationale gives rise to three categories of regulation: ﬁrst, 572 The regulation of international banking 573 compensation schemes...
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