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The influence of the economic approaches to regulation on banking regulations : a short history of banking regulations

Author

Listed:
  • Sophie Harnay

    (BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique)

  • Laurence Scialom

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract

This article highlights the theoretical foundations of the regulations at work in the banking sector and examines their responsibility in the onset of the 2007–2008 financial crisis. Drawing a parallel between the main changes in banking regulations since the 1960s and the evolutions in the economic analyses of regulation over the same period, it shows that the shift from the public interest theory of regulation that prevailed until the late 1960s towards the private interest theory of regulation accounts for the substitution of micro-prudential regulations for macro-prudential ones and explains a paradigmatic change in the conception of the regulatory instruments of the banking authorities. It also shows that although the outcome of several factors, the 2007–2008 crisis was also a consequence of the fact that the economic analysis of banking regulations supported micro-prudential regulations that fail to take the global features and impact of banking activities into account and have proved unable to recommend effective solutions in a context of crisis.

Suggested Citation

  • Sophie Harnay & Laurence Scialom, 2016. "The influence of the economic approaches to regulation on banking regulations : a short history of banking regulations," Post-Print hal-01673059, HAL.
    • Handle: RePEc:hal:journl:hal-01673059
    DOI: 10.1093/cje/bev023
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    Cited by:

    1. Meier, Samira & Rodriguez Gonzalez, Miguel & Kunze, Frederik, 2021. "The global financial crisis, the EMU sovereign debt crisis and international financial regulation: lessons from a systematic literature review," International Review of Law and Economics, Elsevier, vol. 65(C).
    2. Xing Huan & Gary John Previts & Antonio Parbonetti, 2023. "Understanding the LIBOR scandal: the historical, the ethical, and the technological," Journal of Banking Regulation, Palgrave Macmillan, vol. 24(4), pages 403-419, December.
    3. Muhammad Azizul Islam & Chris J. Van Staden, 2022. "Modern Slavery Disclosure Regulation and Global Supply Chains: Insights from Stakeholder Narratives on the UK Modern Slavery Act," Journal of Business Ethics, Springer, vol. 180(2), pages 455-479, October.
    4. Di Johnson & John Rodwell & Thomas Hendry, 2021. "Analyzing the Impacts of Financial Services Regulation to Make the Case That Buy-Now-Pay-Later Regulation Is Failing," Sustainability, MDPI, vol. 13(4), pages 1-20, February.
    5. Dmytro Kovalenko & Olga Afanasieva & Nani Zabuta & Tetiana Boiko & Rosen Rosenov Baltov, 2021. "Model of Assessing the Overdue Debts in a Commercial Bank Using Neuro-Fuzzy Technologies," JRFM, MDPI, vol. 14(5), pages 1-20, May.

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    Keywords

    Banking Sector; Financial Crisis;

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