Research and publications
Banking: Why does regulation alone not suffice? Why must governments intervene?
If all institutional investors are bound by regulations that force them to sell risky assets during downturns, these assets will ultimately be absorbed by unregulated long-term investors. Additional examination shows that, in the current environment, sovereign wealth funds and governments are the possible buyers of these assets. As public intervention entails moral hazard, it follows that for the stability of the financial system throughout the business cycle regulations must be improved.
Author(s):
Samuel Sender
Summary:
If all institutional investors are bound by regulations that force them to sell risky assets during downturns, these assets will ultimately be absorbed by unregulated long-term investors. Additional examination shows that, in the current environment, sovereign wealth funds and governments are the possible buyers of these assets. As public intervention entails moral hazard, it follows that for the stability of the financial system throughout the business cycle regulations must be improved.
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Register/Log in| Type : | EDHEC Publication |
|---|---|
| Date : | 11/03/2008 |
| Keywords : |
Regulation |
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Operating from campuses in Lille, Nice, Paris, London and Singapore, EDHEC is one of the world’s top 15 business schools. Fully international and directly connected to the business world, EDHEC commands a strong reputation for research excellence and the ability to train entrepreneurs and managers capable of breaking new ground. EDHEC functions as a genuine laboratory of ideas and produces innovative solutions valued by businesses. The School’s teaching is inspired by its research work and a focus on “learning by doing”, all with the aim of equipping people with the skills to succeed in business.
