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The New Global Financial Regulation

This article was written by Laura Tyson, S.K. and Angela Chan, Haas School of Business,University of California at Berkeley, at the occasion of Les Rencontres Economiques d’Aix-en-Provence 2009 “Growth, Demography, Finance: from Major Economic Breakdowns to New Balances”.

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Tyson_cropSignificant regulatory and institutional changes in financial markets often result from the lessons learned from financial crises. The Federal Reserve was established in 1913 in response to the lessons learned from the panic of 1907. The introduction of bank deposit insurance and the creation of the SEC and modern securities regulation were the result of the lessons learned from 1929 stock market crash and the runs on banks that followed. The International Monetary Fund and the World Bank were established in response to the lessons learned from the global financial market collapse and the collapse of trade and global production during the Great Depression of the 1930s. More recently, Japan overhauled its banking and securities regulations in response to the lessons learned from its 1990s banking crisis. Now in keeping with history, nations around the world are re-examining and reforming their regulatory systems and rules for financial markets in response to the lessons learned from the great credit crisis of 2008-2009.