Political Science 2211E Chapter Notes - Chapter Rixen: European Systemic Risk Board, Entertainment Software Rating Board, Financial Stability Forum
23 Jan 2018
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I(cid:454)en, (cid:858)wh(cid:455) regulation after the (cid:272)risis is fee(cid:271)le(cid:859) The creation of credit bubbles that precede financial crises is often facilitated by regulatory gaps that enable market participants to realize greater profits. Eventually the bubble bursts and regulators ex post try to close the particular regulatory gap that has fueled the boom. I argue that it can be explained by focusing on the preferences of national governments and their strategic interaction. I model the situation as a two-level game and incorporate insights on the theory of regulation. Reregulation is hampered by intensive jurisdictional competition. Governments fear losing internationally mobile financial activity to competitor states the literature on the regulation of global financial markets has usually focused on any of three arenas interstate, domestic, and transnational. The financial crisis was a bank run on so-called shadow banks. The lack of regulatory oversight is an important incentive for creating shadow banks.
