financial regulation.docx

financial regulation.docx

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financialregulation

IntroductionandPerspectives

FSA存在的意义：

为了tomakethenewdecision-makingframeworkworkinpractice（例如：

commitmenttocost-benefitrequirements），所以需要：

1needaclearerviewoftheeconomiccaseforregulationoffinancialmarkets,and2arigorousapproachtoassessingwhetherthatcaseismetinrelationtoaparticularsetofinstitutions,

这篇文章的主题：

whyregulationhaswelfarebenefits,

whyitisrationalfor（particularlyretail）consumersoffinancialservicestodemandregulationoffinancialservicesfirms.

关于whojudgethatthereisapositiveroleandeconomicrationaleforregulationinfinance与thosewhoarguethat,atbest,regulationdoesnotenhancewelfareandatworseiscounter-productive,两种观点的区别：

（1）howfinancialinstitutionsandmarketsworkandoperateinpractice,

（2）theincentivestructuresfacedbyfinancialfirms,

（3）theextentofmarketimperfectionsandfailuresinthefinancialsystemandthepowerofregulationandsupervisiontoaddressthem,and

（4）theextenttowhichfinancialproductsandcontractsaresignificantlydifferentfromthegeneralityofgoodsandserviceswhicharenotregulatedtoanywherenearthesamedegreeasfinancialinstitutions.

在深入讲之前，1要分清regulation和monitoring的区别P6。

2由于regulatoryagencies是largelyimposedbytheregulatoreventhoughtheremaybeaprocessofconsultation，所以会产生一些问题：

一些信息的缺失，顾客的不同要求不能被signalled。

3正因为如此，会产生dangerofregulationbeingover-demandedbyconsumersandover-suppliedbyregulators。

例如：

howtoguardagainstsuchdemand-orsupply-drivenover-regulation.原理：

regulationimpose各种cost，这些cost最后会反映在financialservice的价钱上。

如果regulation是多余的，或着重在不重要的事务上，那么会产生avoidablecost而且会大于regulation当初的成本。

4一般认为，regulationisaboutchangingthebehaviourofregulatedinstitutions.由此产生问题：

theextenttowhichbehaviouristobealteredbywayofexternallyimposedrules,orthroughcreatingincentivesforfirmstobehaveinaparticularway.Incentivecontract的设置的好坏影响着regulatedfirms的行为，也会产生副作用。

一些人arescepticalofthebenefitsofregulation.因为他们觉得1如果regulation有用，就不会有marketfailuresandimperfections;2regulation在实际中也解决不了此类问题，3产生的成本比原来的的问题多很多，4耗费很多不同成本。

bankfailuresaroundtheworld就是aproductof‘thepoorlyregulatedandoftendistortedfinancialsectorsinthesecountries。

原因有3：

badincentivestructures,weakmanagementandcontrolsystemswithinbanks,andpoorregulation,monitoringandsupervision.

也有人认为bankfailures是因为theindirectlymaligneffectsofregulation.

Objectivesvsrationale

观点：

regulationservestheinterestofgovernments,legislatorsandregulatedfinancial

firmsbutismostly‘detrimentaltomostconsumers’.所以Itneedstobeemphasised,however,thatmanyoftheregulatorymeasuresthatBenstoncitesdonotapplytotheUnitedKingdom,eitheratallortoanysignificantextent.

从此观点我们只要区别objectivesofregulation（whatoutcomeitistryingtosecure）,therationaleforregulation（whyregulationisnecessaryiftheobjectivesaretobeachieved）,andthereasonsforregulation（whyinpracticeregulationtakesplace）.

inthefinalanalysisthethreecoreobjectivesare:

（1）tosustainsystemicstability,

（2）tomaintainthesafetyandsoundnessoffinancialinstitutions,and

（3）toprotecttheconsumer.

Theeconomicrationaleforregulation

从7个方面解释：

1.Potentialsystemicproblemsassociatedwithexternalities（aparticularformofmarketfailure）.

2.Thecorrectionofothermarketimperfectionsandfailures.

3.Theneedformonitoringoffinancialfirmsandtheeconomiesofscalethatexistinthisactivity.

4.Theneedforconsumerconfidencewhichalsohasapositiveexternality.

5.ThepotentialforGridLock,withassociatedadverseselectionandmoralhazardproblems.

6.Moralhazardassociatedwiththerevealedpreferenceofgovernmentstocreatesafetynetarrangements:

lenderoflastresort,depositinsurance,andcompensationschemes.

7.Consumerdemandforregulationinordertogainadegreeofassuranceandlowertransactionscosts.

Twogenerictypesofregulationandsupervisionareidentified:

（i）prudentialregulation,whichfocusesonthesolvencyandsafetyandsoundnessoffinancialinstitutions,and

（ii）conductofbusinessregulationwhichfocusesonhowfinancialfirmsconductbusinesswiththeircustomers.

为什么要customerprotection？

产生原因：

1institution可能会fail2unsatisfactoryconduct

Financialfirm的失败会对systemicstability,andcauselosstoindividualdepositors有影响。

所以更进一步说regulatorsarealmostinevitablyboundtohaveaprudentialconcernfortheliquidity,solvencyandriskinessoffinancialinstitutions.

Prudentialregulation

Why重要？

becauseofimperfectconsumerinformation,agencyproblemsassociatedwiththenatureoffinancialinstitutions’business,andbecausethebehaviourofafinancialfirmafterconsumershavedealtwithitaffectsthevalueoftheirstakeinthefirm.

Conductofbusinessregulation

怎么做？

在于howfinancialfirmsconductbusinesswiththeircustomers。

businessregulationisdesignedtoestablishrulesandguidelinesaboutappropriatebehaviourandbusinesspracticesindealingwithcustomers.

因此，说回consumerprotectioninretailfinancialservices，fivealternativedimensionstoafailedcontract：

（i）theconsumerreceivesbadadvice-perhapsbecauseanagencyconflictis

exploited;

（ii）thesupplyinginstitutionbecomesinsolventbeforethecontractmatures;

（iii）thecontractturnsouttobedifferentfromwhattheconsumerwasanticipating;

（iv）fraudandmisrepresentation;and

（v）thefinancialinstitutionhasbeenincompetent.

thesevenelementsoftheeconomicrationaleforregulationinfinanceidentifiedabove

1Externalities:

SystemicIssues

为什么SystemicIssuesarecentraltotheregulationofbanks。

1thepivotalpositionofbanksinthefinancialsystem,especiallyinclearingandpaymentssystems;

2thepotentialsystemicdangersresultingfrombankruns;

3thenatureofbank（debt）contractsonbothsidesofthebalancesheet;

4adverseselectionandmoralhazardassociatedwithsafety-netarrangements（lender-of-last-resortanddepositinsurance）.

为什么bank在经济中如此重要：

1theyaretheonlysourceoffinanceforalargenumberofborrowers

2theymanagethepaymentssystem

3banksarepotentiallysubjecttoruns,whichmayhavecontagiouseffects.

Theexternalityisthatthefailureofaninsolventbankcancausedepositorsofotherbankstowithdrawdeposits。

为什么？

1banksofferdebtcontractsforliquiddepositsthatfinancetheacquisitionofilliquidassetsofuncertainvalue.

2abank’sassets（loans）arevaluedmorehighlyonagoing-concernbasisthanonaliquidationorbreak-upofthebank.Inparticular,failureorlossesofonebankmaycauseoutsiderstorevisetheirviewofthevalueofotherbanks’assets

3Ifabankisinsolvent,thosewhowithdrawfirstarepaidinfullwhereaslate-comersmaynotbeabletobepaidinfull.

4theinterconnectednessofbanks（e.g.intheirgrosspositionswitheachotherinclearingsystems,ininter-bankdeposits,etc.）ismuchgreaterthanthatinmostotherindustries,whichmeansthatthefailureofonebankcandirectlycauseimmediatelossestoother,interconnectedbanks.

为了应对bankfailure，一般会采取raiseinterestratesonbankdeposits。

但是，会产生1reducethebank’syieldsfromitsassetsbecauseloandefaultsmayrise；2canerodethe

bank’sexpectedflowofprofits。

所以说ariseindepositinterestratesmaybetakento

signalahigherprobabilityofthebankfailing.

Threecounter-arguments（solventbanksareforcedintoinsolvency）：

（1）itisnotrationalfordepositorstowithdrawdepositsfromasolventbank,

（2）theexistenceofdepositinsuranceinparticularremovestherationalityofwithdrawingdepositsfrombanks,and

（3）ifaruntocashweretooccurthesystemicproblemcaneasilybehandledbythecentralbankoperatingasalender-of-last-resorttothesystemratherthanindividualbanks:

thisinjectionofsystem-wideliquiditycanbedonethroughnormalopenmarketoperations.Theseareconsideredinturn.

（1）Solventbanks

什么情况下会产生bankrun：

（i）depositorsmaynotbecertainthatabankisinfactsolvent;

（ii）individualdepositorsmaytakearationalandinformedviewthemselvesbutbelieveotherdepositorswillnot

（iii）depositorsmayrealisethatabankcangetintodifficultyifotherdepositorsrun;

（iv）depositorsmighttaketheviewthat,whiletheprobabilityofabankfailureisverylow,itwouldneverthelessbeveryserioustothemifitweretooccur.Withrisk-aversion,andarelativelyhighratioofbankdepositstototalwealth,thethresholdvalueofthisprobabilityisreducedyetfurther;

（v）depositorsmightnotbeconvincedeitherthatthereisalenderoflastresort,orthatitwilloperatewithoutfriction.

还有一种观点认为原因是：

Itisoftenthecasethatstock-marketdatarevealthatbadnewsforonebankdepressesotherbanks’valuesalso.

Benston认为bankrun不会使solventbanksareforcedintoinsolvency。

Whiletheprobabilitythatthefailureofasinglebankwillinduceasystemicproblemmaybeverylow,ifitweretooccuritwouldbeserious,andthecostswouldbehigh.

（2）Depositinsurance

Beston的观点是不一定都对，只在某种情况下适用。

ItisnotthecaseintheUKorinEuropegenerally。

因为1banksmaybeinducedtotakemorerisksandoperatewithlesscapital,anddepositorsmightrationallyseekhigh-riskbanksastheyreceiveahigherrateofinterestintheeventthatthebankremainssolventbutarecompensatedifthebankfails.2ifcoverageislimited,theincentiveinsomecircumstancesforbankrunsremains.

就是说，即使depositinsurance可以减少bankfailure的几率，itisstillrationaltowithdrawdepositsifthebankisperceivedasbeingvulnerable.

就算whendepositinsurance（orothercompensation）isavailable,therearestillproblemsforconsumers:

itcantaketimebeforeredressismade,itmaybepercei