Financial Regulation

The functioning of financial markets is heavily impacted by regulation, which is often extremely complex and opaque to outsiders. Since the latest financial crisis, the global regulatory landscape has evolved at an increasing speed, making it even more difficult to apprehend all the channels through which regulatory choices impact financial intermediation, and indirectly the financing costs of all companies.

However, it has become impossible for companies to neglect the regulatory environment when deciding on their strategy. Adapting optimally to regulatory constraints, and anticipating them, is key to a financial company’s profitability in a competitive environment.

Course Objectives

  • Understanding the impact of financial regulation on firms, both financial and non-financial, and how best to adapt to regulatory constraints.
  • Borrowing conceptual tools from economics and finance to analyse various forms of regulation: their objectives, their implementation, and their shortcomings.
  • Studying the processes governing regulatory changes, the role of political economy issues and of lobbying.
  • Getting a panoramic view of recent or on-going regulatory reforms such as the Dodd-Frank Act, the European Banking Union, proposals to regulate high-frequency trading and financial transactions taxes.

Course Content

The course aims at introducing a number of concrete examples of financial regulation as well as transveral topics. In each case the approach will be to underline the impact of regulation on companies and how they react:

  • Examples of regulation (may vary depending on students' interests and recent developements): the Dodd-Frank Act, the European Banking Union, the debates on banks' capital requirements, Basel III, banks' liquidity requirements, the regulation of high-frequency trading, the regulation of OTC derivatives, the debates on separation of commercial and investment banking, financial transactions taxes, short-selling bans, financial information and the Sarbanes-Oxley Act...
  • Transveral topics: too big to fail, political economy of financial regulation, regulatory dialectics, ex ante and ex post effects of regulation, regulation and competition, regulation and financial innovation, international competition in regulatory standards, coordination between regulatory agencies, regulatory capture.