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Global Banking$
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Roy C. Smith, Ingo Walter, and Gayle DeLong

Print publication date: 2012

Print ISBN-13: 9780195335934

Published to Oxford Scholarship Online: May 2012

DOI: 10.1093/acprof:oso/9780195335934.001.0001

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Dealing with Regulatory and Compliance Issues

Dealing with Regulatory and Compliance Issues

(p.358) Chapter 15 Dealing with Regulatory and Compliance Issues
Global Banking

Roy C. Smith

Ingo Walter

Gayle Delong

Oxford University Press

This chapter considers the key regulatory overlays of the global financial services industry, emphasizing that balancing efficiency against stability and fairness is never easy. Linkages are drawn between structural change in financial intermediation and supervisory and regulatory functions. The regulatory environment is central to the evolution of the financial services industry. Overregulation leads to opportunity costs in the form of inefficient allocation of capital to the detriment of end users of the financial system and overall economic performance. Underregulation can can engender market inequities or promote financial collapse and all of the costs associated with systemic crises. Even a finely balanced degree of regulation carries with it the risks associated with moral hazard and adverse selection. The global regulatory environment must ultimately allow various players to compete in one another’s markets geographically, cross-client, and cross-product. The regulatory outcome must therefore provide a reasonably level playing field for all kinds of financial institutions to compete for business across the entire financial intermediation spectrum.

Keywords:   level playing field, moral hazard, overregulation, underregulation

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