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Financial Innovation and Transparency in Turbulent Times

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Abstract

The stunning failure of a number of banks during the recent crisis has put regulatory intervention high on the agenda of governments. Adequate risk monitoring, including by credit rating agencies, measurement, and management have proven to be a daunting task, whereas regulation of innovative financial instruments has not brought about adequate disclosure and transparency. After critically reviewing the virtues and pitfalls of financial innovation, this paper offers an analysis of the main transparency initiatives undertaken in the E.U. and the U.S. in the wake of the crisis to harness various financial innovations that have marked the history of financial markets in the last three decades. The paper argues for better managed regulatory cooperation at the international level and warns against institutional deficiencies of the new regulatory frameworks in the E.U. and the U.S. One key message of the paper is that more regulation may hamper financial innovation; yet better regulation may direct entrepreneurial talents to financial innovations that enhance societal wellbeing and still yield reasonable returns.

Suggested Citation

  • Delimatsis, Panagiotis, 2011. "Financial Innovation and Transparency in Turbulent Times," Journal of Financial Transformation, Capco Institute, vol. 33, pages 99-112.
  • Handle: RePEc:ris:jofitr:1519
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    Cited by:

    1. repec:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-017-0060-2 is not listed on IDEAS
    2. Galia Taseva, 2012. "Trade Crediting – Barriers to Its Use for Financing the Innovations," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 3, pages 154-162.

    More about this item

    Keywords

    Financial innovation; transparency; derivatives; European Union; Dodd-Frank Act; World Trade Organization; General Agreement on Trade in Services;

    JEL classification:

    • F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
    • G01 - Financial Economics - - General - - - Financial Crises
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
    • O38 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Government Policy

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