Footnote:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments September 9, 2010 erstellt
Description:
China and East Asia have survived the global financial crisis of 2007-9 reasonably unscathed. China has achieved a real rate of growth of 9.1 percent in 2009 and 11.1 percent year-over-year in the first half of 2010. Other economies in East Asia, such as Singapore, South Korea and Taiwan, have also begun to recover. India has also performed well. However, the same cannot be said of the United States and Europe, which are still mired in economic recession with low growth rates but high unemployment rates. What caused the global financial crisis of 2007-2009? The principal causes were: (1) Easy money in the United States; (2) Failures of regulation and supervision; and (3) Defects in the institutional design of the financial sector. One principal cause of the global financial crisis is regulatory and supervisory failure in the United States and Europe. What lessons can financial regulatory agencies draw from the 2007-2009 global financial crisis? What do financial regulatory agencies need to do to avoid the repetition of the same mistakes and prevent the recurrence of the same crises? This paper will focus on (1) How financial regulation and supervision should be strengthened so as to avoid failures in the future; and (2) How the institutional design of the financial sector can be enhanced so as to facilitate its successful regulation and supervision. What are the objectives of financial regulation and supervision? They are:(1) Protection of consumers (depositors and borrowers);(2) Protection of creditors and investors from fraud;(3) Ensuring competitiveness of the financial markets and hence their efficiency; and(4) Prevention of systemic failure. Why were the serious regulatory failures that allowed the global financial crisis to occur possible? The first fundamental reason is the overly strong faith on the part of the U.S. financial regulators that whatever could go wrong “the market would take care of it.” It turned out that the market, in the absence of proper regulatory oversight, could not take care of it. The second fundamental reason is a phenomenon known as regulatory capture — over time the regulatory agencies have been “captured” by those firms they are supposed to regulate, through lobbying and other efforts by the latter, and are thus frequently persuaded to relax regulatory requirements in favour of these firms