Global Shock, Risks, and Asian Financial Reform
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Global Shock, Risks, and Asian Financial Reform

Edited by Iwan J. Aziz and Hyun S. Shin

The growth of financial markets has clearly outpaced the development of financial market regulations. With growing complexity in the world of finance and the resultant higher frequency of financial crises, all eyes have shifted toward the current inadequacy of financial regulation. This book expertly examines what this episode means for Asia’s financial sector and its stability, and what the implications will be for the region’s financial regulation. By focusing on legal and institutional frameworks the book also elaborates on various issues and challenges in terms of how financial liberalization can maximize the benefits and minimize the risks of crisis.
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Chapter 6: Addressing systemic risk in East Asia: financial regulatory design

Rolf H. Weber, Douglas W. Arner, Evan C. Gibson and Simone Baumann


The global, Eurozone, and Asian financial crises have underlined the risks and the importance of appropriate regulatory design and coverage for financial stability (Cecchetti et al. 2009, p. 2). In the wake of the global financial crisis (GFC), the G20 and the Financial Stability Board (FSB) and its constituents – such as the Basel Committee on Banking Supervision (BCBS), the International Organization of Securities Commissions (IOSCO), and the Joint Forum – have or are in the process of developing international regulatory standards and guidance in relation to financial regulation and financial stability. There is thus an emerging corpus of international best practices for financial regulation. At the same time, this corpus provides little guidance with respect to overall design of a financial regulatory system to meet the specific needs and risks of a given domestic financial system. In East Asia, which is characterized in this chapter as ASEAN13, domestic financial systems tend to be dominated by small numbers of financial institutions, particularly banks, which are large in the context of individual financial systems.

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