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on Regulation |
| By: | Ping, Luo (Asian Development Bank Institute) |
| Abstract: | <p>This paper discusses the banking regulatory and supervisory practices in People’s Republic of China (PRC) with reference to the international standard for banking supervision, namely, the Basel Core Principles for Effective Banking Supervision (BCPs). While the PRC has incorporated many sound practices advocated by the BCPs, there are quite a few areas where significant differences can be observed with respect to qualification review of senior management, broader regulation at the product level, prescriptive rules, and guidance for risk management. Broadly speaking, the PRC adopts a rules-based approach to regulation; in many cases, regulations are prescriptive or even intrusive. In building a robust supervisory system, the PRC finds specific guidance more helpful than sole reliance on principles-based approaches. <p>The paper argues that general principles and a principle-based approach to regulation do not seem to work well for emerging markets. Indeed, the current financial crisis has revealed some shortcomings in the existing international standards on banking supervision. Perhaps this standard can be improved by greater specificity and by incorporating more aspects of the experiences in emerging markets. |
| Keywords: | banking regulatory supervisory practices prc; international standard banking supervision; basel core banking supervision; bcps |
| JEL: | G20 G28 |
| Date: | 2011–02–10 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0265&r=reg |
| By: | Acharya, Viral V. (Asian Development Bank Institute); Cooley, Thomas (Asian Development Bank Institute); Richardson, Matthew (Asian Development Bank Institute); Walter, Ingo (Asian Development Bank Institute) |
| Abstract: | The paper analyzes the financial crisis of 2007–2009 through the lens of market failures and regulatory failures and presents a case that there were four primary failures contributing to the crisis: excessive risk-taking in the financial sector due to mispriced government guarantees; regulatory focus on individual institution risk rather than systemic risk; opacity of positions in financial derivatives that produced externalities from individual firm failures; and runs on the unregulated banking sector that eventually threatened to bring down the entire financial sector. In emphasizing the role of regulatory failures, the paper provides a description of regulatory evolution in response to the panic of 1907 and the Great Depression, why the regulation put in place then was successful in addressing market failures, but how, over time, especially around the resolutions of Continental Illinois, Savings and Loans crisis and the Long-Term Capital Management, expectations of too-big-to-fail status got anchored. The paper proposes specific reforms to address the four market and regulatory failures we identify, and we conclude with some lessons for emerging markets. |
| Keywords: | global financial crisis; LTCM; market failures; regulation; emerging markets |
| JEL: | E44 G15 G18 G21 G24 |
| Date: | 2011–02–08 |
| URL: | http://d.repec.org/n?u=RePEc:ris:adbiwp:0264&r=reg |
| By: | Sarah L. Stafford (Department of Economics, College of William and Mary) |
| Abstract: | Over the past two decades the role of private parties in the policing of environmental regulation has grown dramatically. In some cases the Environmental Protection Agency (EPA) has led the effort to involve private parties, either formally or informally. In other situations, private parties have provided the impetus for the new activities and the activities are, for the most part, conducted independently from EPA. Private policing can be beneficial from a public policy perspective, as long as the increased involvement of the private sector either decreases the overall costs of achieving a particular level of environmental performance or increases environmental performance in a cost-effective manner. However, private parties could also divert regulated entities away from regulatory objectives. This article explores the privatization of environmental enforcement, presenting examples of six private programs and activities and highlighting both the benefits and costs of these activities. Some private activities do have a positive effect on environmental performance: EPA’s self-policing policy has increased overall compliance while participation in the international environmental certification program ISO 14001 is correlated with an increase in both compliance and environmental performance more generally. However, studies of other private initiatives show that privatization can have a deleterious effect on the achievement of regulatory goals. For example, an analysis of private citizen suits finds that such suits decreases public enforcement rather than supplementing it. Additionally, we have no real understanding of the effect of many private policing initiatives either because no analyses have been conducted or because the existing studies do not focus on the effectiveness of such initiatives in achieving regulatory goals. Although the examples cited in this article are not necessarily representative of all private policing, the mixed evidence on the effectiveness of private sector participation in environmental regulation does suggest the need for careful evaluation of these initiatives. The article concludes by making a case for a more deliberate approach to evaluating the role of the private sector in the enforcement of environmental regulation. I argue that before responding to continuing calls to further privatize environmental regulation and enforcement, we must first determine whether existing private participation is helping to achieve regulatory goals. Where it is not, we must modify the existing initiatives, and potentially the underlying regulations and enforcement mechanisms as well, to maximize their benefits. Only then should we look to expand the role of the private sector in the policing of environmental regulations. |
| Keywords: | Privatization, Out-sourcing, Self-Policing |
| JEL: | L33 Q2 |
| Date: | 2011–02–06 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:111&r=reg |
| By: | Stephan Schaeffler; Christoph Weber (Chair for Management Sciences and Energy Economics, University of Duisburg-Essen) |
| Abstract: | Since the events of liberalization of energy markets leading to the introduction of unbundling and incentive regulation for electricity and gas network operators in many countries, the long-lasting discussion between regulation authorities and regulated firms about adequate equity costs has gained in intensity. Heavy criticism has been formulated by the affected network operators, suggesting that the methodology is not adequate, that data sets of companies used for computation of equity returns are not comparable or that other parameters of the formula, such as the market risk premium and the risk-free interest rate, are not appropriate. One aim of this paper consequently is to give an overview of results obtained in the field of empirical research, the focus lying on utilities, network operators and specific industry betas. As such, this paper may serve as a hub to research papers and give numerous sources for practitioners and researchers. Secondly, this paper presents and discusses the most important drivers of systematic risk which is an indispensable groundwork for determining adequate betas. Thirdly, an overview of the handling of equity return by regulation authorities will be provided. Fourthly, a recent data set with more than 20 network operators will be used to compute the required equity return with different methodologies (CAPM, Fama-French-TFM, Ross-APT). This provides evidence that regulatory practice ignores the Fama-French-TFM or the APT, even though these approaches prove to be valid to improve estimation quality. Consequently, this paper supports regulators and practitioners in search for the right approach to use concerning investment decisions and regulatory rule setting. |
| Keywords: | Network operator, cost of capital, asset pricing models, regulation, cost of equity |
| JEL: | G31 G38 L9 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:dui:wpaper:1101&r=reg |
| By: | Nicolas Veron (Peterson Institute for International Economics) |
| Abstract: | The European Union will have to put forth significant effort to develop its own financial regulation system in the absence of strong momentum towards global standards. Nicolas Véron compares US and EU regulatory responses to the global financial crisis and then breaks down the specific areas of reform in which the European Union has acted or is expected to act. The successful creation of the European Supervisory Authorities is the main achievement so far and could lead over time to a distinct European financial regulatory philosophy. |
| Date: | 2010–12 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb10-30&r=reg |
| By: | Nicolas Veron (Peterson Institute for International Economics); Stephane Rottier (National Bank of Belgium) |
| Abstract: | Two major shifts in the global financial regulatory landscape are likely impeding harmonization of global financial regulation: financial multipolarity, meaning the rise of emerging-market economies such as China and the impact of this trend on decision-making at the global level, and financial reregulation, or the trend toward stronger regulation of financial systems to buttress financial stability, particularly in developed economies. As a result, the ambitious objectives initially set by the G-20 leaders in the wake of the unprecedented financial crisis have so far not resulted in major international breakthroughs, warranting a reconsideration of the global financial regulatory agenda. Consistent regulatory choices across the globe are preferable, but achieving consistency involves difficult political and economic tradeoffs. Continued global capital-market integration can no longer be taken for granted. Policymakers should prioritize four key components to ensure the sustainability of financial integration: (1) strong global public institutions to provide a comprehensive analytical picture, set authoritative standards, and foster and monitor the consistency of regulatory practice; (2) globally consistent financial information; (3) new arrangements to enable and supervise globally integrated capital-market infrastructure; and (4) creating a level playing field for global capital-market intermediaries by addressing competitive distortions. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iie:pbrief:pb10-22&r=reg |
| By: | Christian Calmes (Université du Québec en Outaouais); Raymond Theoret (Université du Québec en Outaouais) |
| Abstract: | The growth of shadow banking in recent decades has changed the concept of banking. It has meant less deposit-taking and lending and more market-oriented banking activities, including in particular a growing trade in securitized products. However, shadow banking is opaque; a problem that was underlined in the recent financial crisis. Does the experience of the financial crisis and its links to the riskiness of banking mean bank re-regulation is necessary? In the Canadian context at least, better reporting of bank risk seems to be a more appropriate way than re-regulation to prevent financial turmoil from arising in this area. Market-oriented operations should be more exposed to daylight, to enable a better evaluation of true bank risk, and regulatory agencies should require detailed reports on activities generating noninterest income. Better indicators of leverage need also to be developed, owing to leverage’s role as the principal channel of bank risk-taking. |
| Keywords: | Financial Services, shadow banking system, Canadian banking system, regulation, subprime mortgage crisis |
| JEL: | G21 G24 G28 |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdh:ebrief:110&r=reg |
| By: | John Thanassoulis |
| Abstract: | This paper studies banker remuneration in a competitive market for banker talent. I model, and then calibrate, the default risk of the banks generated by investments and remuneration pressures. Competing banks prefer to pay their banking staff in bonuses and not in wages as risk sharing on the remuneration bill is valuable. But competition for bankers generates a negative externality driving up rival banks’ default risk. Optimal financial regulation involves an appropriately structured limit on the proportion of the balance sheet used for bonuses. However stringent bonus caps are value destroying, default risk enhancing and cannot be optimal for regulators who control only a small number of banks. The paper allows an assessment of the intellectual arguments behind widespread calls to regulate the pay of bankers. The paper uses US data to calibrate the analysis and demonstrate the significant contribution of remuneration to default risk. |
| Keywords: | Bonuses, default risk, competition for bankers, financial regulation |
| JEL: | G21 G34 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:532&r=reg |
| By: | Morris Goldstein (Peterson Institute for International Economics) |
| Abstract: | This paper links reform of the international financial regulatory system with reform of the international monetary system because as this recent global crisis demonstrates so vividly, the root causes can come from both the financial and monetary spheres and they can interact in variety of dangerous ways. On the financial regulatory side, I highlight three problems: developing a better tool kit for pricking asset-price bubbles before they get too large; shooting for national minima for regulatory bank capital that are at least twice as high those recently agreed as part of Basel III; and implementing a comprehensive approach to "too-big-to-fail" financial institutions that will rein-in their past excessive risktaking. On the international monetary side, I emphasize what needs to be done to discourage "beggar-thy-neighbor" exchange rate policies, including agreeing on a graduated set of penalties for countries that refuse persistently to honor their international obligations on exchange rate policy. |
| Keywords: | financial regulation, IMF surveillance, too-big-to-fail, asset-price bubbles |
| JEL: | F3 F33 G28 G38 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:iie:wpaper:wp11-5&r=reg |
| By: | Ojo, Marianne |
| Abstract: | The meeting of the Governors and Heads of Supervision on the 12 September 2010, their decisions in relation to the new capital framework known as Basel III, as well as the endorsement of the agreements reached on the 26 July 2010, once again, reflect the typical situation where great expectations with rather unequivocal, and in a sense, disappointing results are delivered. The outcome of various consultations by the Basel Committee on Banking Supervision, consultations which culminated in the present Basel III framework, also reflect the focus on measures aimed at addressing problems attributed to Basel II, that is, measures aimed at mitigating pro cyclicality. This is rather astonishing given one critical lesson which has been drawn from the recent Financial Crisis: namely, that capital measures on their own, were and are insufficient in addressing and averting the Financial Crisis. Furthermore, banks which have been complying with capital adequacy requirements could still face severe liquidity problems. As well as an increase of the minimum common equity requirement from 2% to 4.5%, the recent agreement and decisions of the Governors and Heads of Supervision also include the stipulation that banks hold a capital conservation buffer of 2.5% - hence consolidating the stronger definition of capital (as agreed in the previous meeting held by the Governors and Heads of Supervision earlier in July 2010). |
| Keywords: | pro cyclicality; liquidity; capital; Basel III; countercyclical; forward looking provisioning; financial regulation; financial crises |
| JEL: | K2 D8 E3 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:28550&r=reg |
| By: | Ashima Goyal (Indira Gandhi Institute of Development Research) |
| Abstract: | The paper defines financial liberalization, distinguishing between liberalization of domestic financial markets and capital account convertibility. It then examines the stages and the strategy of Indian financial reform. The Indian strategy followed a well thought out sequence whereby full capital account liberalization was to come after deepening domestic markets, and improving government finances. One alone is dangerous without the others. The experience of the global crisis has validated the Indian strategy and also shown that foreign entry has benefits but cannot resolve all issues. Deepening domestic markets and better domestic and international regulation is a necessary prerequisite for full convertibility. The direction of future liberalization should be such as meets Indian needs of financial inclusion, infrastructure finance, and domestic market deepening. |
| Keywords: | liberalization, capital account convertibility, regulation, inclusion, markets |
| JEL: | F36 G18 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2010-022&r=reg |
| By: | Michael Greenstone; John A. List; Chad Syverson |
| Abstract: | Whether and to what extent environmental regulations influence the competitiveness of firms remains a hotly debated issue. Using detailed production data from tens of thousands of U.S. manufacturing plants drawn from Annual Survey of Manufactures, we estimate the effects of environmental regulations—captured by the Clean Air Act Amendments’ division of counties into pollutant-specific nonattainment and attainment categories—on manufacturing plants’ total factor productivity (TFP) levels. We find that among surviving polluting plants, a nonattainment designation is associated with a roughly 2.6 percent decline in TFP. The regulations governing ozone have particularly discernable effects on productivity, though effects are also seen among particulates and sulfur dioxide emitters. Carbon monoxide nonattainment, on the other hand, appears to increase measured TFP, though this appears to be concentrated among refineries. When we apply corrections for two likely sources of positive bias in these estimates (price mismeasurement and sample selection on survival), we estimate that the total TFP loss for polluting plants in nonattaining counties is 4.8 percent. This corresponds to an annual lost output in the manufacturing sector of roughly $14.7 billion in 1987 dollars ($24.4 billion in 2009 dollars). These costs have important implications for both the intensity and location of firm expansions. |
| Date: | 2011–01 |
| URL: | http://d.repec.org/n?u=RePEc:cen:wpaper:11-03&r=reg |
| By: | Michael Joos |
| Abstract: | Das Working Paper befasst sich mit dem Wandel des regulativen Modus in der österreichischen Elektrizitäts- und Eisenbahnwirtschaft unter dem Einfluss der Liberalisierung dieser Sektoren auf EU-Ebene. Analysiert wird der Wandel von hierarchisch – unter enger politischer Kontrolle stehenden – organisierten Sektoren hin zu marktwirtschaftlich organisierten Sektoren auf Basis von EU-Vorgaben. Beide Sektoren sind seit den 1990er Jahren Ziel einer Liberalisierungspolitik auf EU-Ebene, da diese Sektoren bis dahin als leitungsgebundene „Dienstleistungen von allgemeinem wirtschaftlichem Interesse“ (DAWI) bzw. „gemeinwirt-schaftliche Leistungen“ durch das EU-Wettbewerbsregime insbesondere Dienstleistungsfreiheit nicht erfasst waren. Der Fokus der Arbeit liegt dabei auf dem Wandel der Regulierung sogenannter gemeinwirtschaftlicher Verpflichtungen, die Dienstleistungen von allgemeinem wirtschaftlichem Interesse auferlegt werden können. Konzeptuelle Rahmen dabei sind die Analysen von Majone (1996b) zum „Regulatory State“ und der Integrationsansatz von Scharpf (2009). Die zentrale Forschungsfrage lautet: Wie hat sich das Verhältnis von Markt, Staat und Gemeinwohlorientierung durch die EU-Sektorliberalisierungsinitiativen im österreichischen Elektrizitäts- und im österreichischen Eisenbahnsektor verändert? |
| Keywords: | political science; Austria; regulatory politics; energy policy; electricity; liberalization; competition policy |
| Date: | 2010–05–15 |
| URL: | http://d.repec.org/n?u=RePEc:erp:eifxxx:p0012&r=reg |
| By: | James Heintz; Heidi Garrett-Peltier; Ben Zipperer |
| Abstract: | In this study commissioned by Ceres, James Heintz, Heidi Garrett-Peltier, and Ben Zipperer examine the economic impacts of air pollution regulations forthcoming from the Environmental Protection Agency: the Clean Air Transport Rule governing sulfur dioxide and nitrogen oxide emissions, and the National Emissions Standards for Hazardous Air Pollutants for Utility Boilers rule, which will set limits for hazardous air pollutants. Focusing on 36 states, the study assesses the potential employment impacts of the transformation of the nation’s energy generation plants to a cleaner, more efficient fleet, through investments in pollution controls and the retirement of outdated plants. |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:uma:perips:ceres_peri_feb11&r=reg |
| By: | Hallward-Driemeier, Mary; Pritchett, Lant |
| Abstract: | This paper examines de jure and de facto measures of regulations, finding the relationship between them is neither one for one, nor linear."Doing Business"provides indicators of the formal time and costs associated with fully complying with regulations. Enterprise Surveys report the actual experiences of a wide range of firms. First, there are significant variations in reported times to complete the same transaction by firms facing the same formal policy. Second, regulatory compliance appears"under water"as firms report actual times much less than the Doing Business reported days. Third, the data reveal substantial differences between favored and disfavored firms in the same location. Favored firms show minimal variation, so Doing Business has little predictive power for the times they report. For disfavored firms, the variation is greater, although still not significantly correlated with Doing Business. Fourth, where multiple Enterprise Surveys are available, there is little association over time, with reductions in Doing Business days as likely to be accompanied by increases in Enterprise Surveys days. Comparing these two types of measures suggests very different ways of thinking about policy versus policy implementation, what"a climate"for firms in a country might mean, and what the options for"policy reform"really are. |
| Keywords: | E-Business,Microfinance,Access to Finance,Climate Change Economics,Banks&Banking Reform |
| Date: | 2011–02–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5563&r=reg |
| By: | Mario Pagliero (Department of Economics and Public Finance "G. Prato", University of Torino) |
| Abstract: | Entry into licensed professions requires meeting competency requirements, typically assessed through licensing examinations. In the market for lawyers, there are large differences in the difficulty of the entry examination both across states and over time. The paper explores whether the number and quality of individuals attempting to enter the profession (potential supply) affects the difficulty of the entry examination. The empirical results show that a larger potential supply leads to more difficult licensing exams and lower pass rates. This implies that licensing partially shelters the legal market from supply shocks. |
| Keywords: | occupational licensing, legal market, bar exam, minimum standards, entry regulation |
| JEL: | L4 L5 J44 K2 |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:tur:wpaper:18&r=reg |
| By: | Ducos, Jean |
| Abstract: | Cette thèse a pour objet de réaliser une analyse économique de la médecine libérale en insistant sur ce qui, à nos yeux, est tu ou non reconnu. Il s’agit d’une analyse institutionnaliste basée sur l’encastrement historique et social de la santé. Après une présentation des spécificités de l’économie de la santé et un historique, nous abordons les institutions de la médecine libérale. Les caractéristiques essentielles de l’offre sont présentées en mettant l’accent sur ce qui fait problème tels que les comportements opportunistes des médecins libéraux, les carences de la régulation et les défaillances de la médecine libérale, sans oublier qu’il s’agit d’une profession en souffrance et en manque de reconnaissance. Concernant la demande, nous nous efforçons d’introduire l’état de maladie dans l’analyse économique. Enfin, après une mise en exergue des problèmes de la médecine libérale, nous faisons des propositions dans une perspective de développement des soins de santé primaires. Nous concluons sur l’utilité de la médecine libérale et sur son avenir fondé sur sa capacité à se réforme. |
| Abstract: | This thesis aims to undertake an economic analysis of private medical practice while stressing on elements, which in our view, remain unsaid or unrecognised. It is about an institutional analysis, based on the historic and social embedding of the health. After presenting the specificities of health economics and a history, we will deal with the institutions of private medical practice. The essential features of « supply » are introduced by stressing upon the drawbacks of private medical practice concerning the opportunistic behaviour of private practitioners and the deficiencies in regulation, without ignoring the fact that it is a profession that is suffering and needs recognition. As far as « demand » is concerned, we will stress upon the state of sickness in the economic analysis. Finally, after underlining the problems linked with private medical practice, we will outline proposals with a perspective of developing primary health care. The conclusion will treat the utility factory of private medical practice and its future, based upon its capability to reform itself. |
| Keywords: | régulation médicale; primary health care; private medical practice; ethics; embedding; demand of care; soins de santé primaires; médecine libérale; institutions; éthique; encastrement; demande de soins; |
| JEL: | I18 I11 |
| Date: | 2010–11 |
| URL: | http://d.repec.org/n?u=RePEc:ner:dauphi:urn:hdl:123456789/5684&r=reg |