Reinventing Financial Regulation: A Blueprint for Overcoming Systemic Risk

  • 6h 8m
  • Avinash D. Persaud
  • Apress
  • 2015

Reinventing Financial Regulation offers an analysis of the fundamental flaws that plague the current system of financial regulation, one built around ideas of "risk-sensitivity" and "capital adequacy." Author Avinash Persaud argues that while some sensible reforms have been introduced, a fresh approach—centered on risk capacity—is required. When the entire regime is compromised, simply slapping bandages on each new wound will do nothing to cure the underlying disease.

Reinventing Financial Regulation goes beyond an urgent call to fix our profoundly troubled and damaged financial markets. It is a blueprint for an effective financial regulation system that could very well save the future of finance.

What would a well-regulated financial system look like? Until now, policymakers, financial experts, and leading academics have been content to avoid facing this question head–on. We have been offered piecemeal reforms that ultimately leave the global financial system exposed to different versions of the same risks that so recently brought it to its knees. The world economy literally cannot afford to dodge this question any longer.

Persaud's goal to bring clarity and a powerful simplicity to the financial regulation process results in a systematic and apolitical framework for fixing the world's fractured financial industry and transforming its regulation—not just for today's financial climate, but once and for all.

What you’ll learn

This book asks—and answers—the following questions:

  • Why is it important to regulate the financial industry over and above the way other industries are regulated?
  • Why do many of the politically appealing ideas like locking up bankers, clawing back their bonuses, banning derivatives, regulating international banks internationally, and ending tax-payer funded bailouts, have less merit than some politically unpopular ideas like capping bankers pay and levying small transaction taxes?
  • Why are financial regulators most lost when dealing with systemic risk, not consumer protection, though it is the latter that holds most political interest?
  • What causes financial crashes?
  • Why is the current "risk-sensitive, capital adequacy" approach to financial regulation fundamentally flawed and leading to more and bigger financial crashes?
  • What concrete steps can countries take to construct a new regulatory model based around risk-capacity that will better protect consumers, countries, and the world economy from yet another financial boom-bust?

Who this book is for

Reinventing Financial Regulation is of the utmost importance to the financial industry, regulators, central bankers, politicians, policymakers, economists, and anyone with a bank account. Although it will include descriptions and explanations of some more technical concepts, like systemic risk, it is written in a way to make the pressing topic of financial regulation accessible to anyone with an interest in the health of the world economy.

About the Author

Avinash D. Persaud's career spans finance, academia, and public policy. He is currently Chairman of Intelligence Capital, a London-based financial consultancy; Chairman of Elara Capital, an emerging market investment firm based in London and Mumbai; and Chairman of Paradise Beach, the company developing Four Seasons Barbados. Previously, he served as managing director at State Street Corporation; global head of currency and commodity research at JP Morgan; and director of fixed income research at UBS. His analytical innovations led him to be ranked as one of the top three currency analysts in global investor surveys for over a decade. According to the Financial Times, his work on investors' shifting appetite for risk "has entered the popular lexicon of analysts." Mr. Persaud was formerly Chairman of the Warwick Commission on Financial Reform; Chairman of the regulatory subcommittee of the UN High-Level Task Force on Financial Reform;Co-Chair of the OECD Emerging Markets Network; Member of the UK Government's Audit and Risk Committee; Member of the Intergovernmental Task Force on Financial Taxes; and Member of the Pew Task Force to the U.S. Senate Banking Committee. He is Emeritus Professor at Gresham College; Senior Fellow at London Business School; Visiting Fellow at the Centre for Financial Analysis & Policy at Cambridge Judge Business School; 2010 President of the British Association for the Advancement of Science (Section F); and former Governor to the London School of Economics. He was Visiting Scholar at both the IMF and ECB and was a founding director of the 90,000-strong Global Association of Risk Professionals. In 2000, he won the Jacques de Larosiere Prize in Global Finance from the Institute of International Finance, and he was recently ranked as the No. 2 public intellectual in the world on the financial crisis by an expert panel for Prospect Magazine.

In this Book

  • Reinventing Financial Regulation
  • Why Do We Regulate Finance?
  • What Causes Financial Crashes
  • Why Taxpayers Need to Be on the Hook
  • How Should We Regulate the Financial System?
  • Putting the New Framework to the Test
  • Protecting Consumers
  • How Accounting, Credit, and Risk Standards Create Risk
  • What to Do About Complex Financial Instruments
  • Bankers' Pay
  • Why Locking Them Up Will Not Work
  • Financial Transaction Taxes
  • The Shape of Financial Regulation
  • The Locus of International Financial Regulation