Romano on Global Harmonization of Financial Innovation Risk Regulation

Roberta Romano (Yale Law School; National Bureau of Economic Research (NBER); European Corporate Governance Institute (ECGI)) has posted Pitfalls of Global Harmonization of Systemic Risk Regulation in a World of Financial Innovation on SSRN.  Here is the abstract: The working hypothesis of international financial regulation is that it should be globally harmonized. This paper contends, to the contrary, that we should be wary about the efficacy of global harmonization, and in particular, harmonization of systemic risk measurement and regulation. The thesis is informed by what I consider two key lessons from the recent global financial crisis. The first lesson is that, when business strategies that internationally-harmonized regulation induces banks to follow go seriously awry, the adverse consequences will spread globally and not be limited to one regulator’s domain. The second lesson is that, innovations in financial technology that have been engines of…

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