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Arner, Douglas W.; Park, Cyn-Young --- "Global Financial Regulatory Reforms: Implications for East Asia" [2011] ELECD 471; in Buckley, P. Ross; Hu, Weixing Richard; Arner, W. Douglas (eds), "East Asian Economic Integration" (Edward Elgar Publishing, 2011)

Book Title: East Asian Economic Integration

Editor(s): Buckley, P. Ross; Hu, Weixing Richard; Arner, W. Douglas

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781849808682

Section: Chapter 9

Section Title: Global Financial Regulatory Reforms: Implications for East Asia

Author(s): Arner, Douglas W.; Park, Cyn-Young

Number of pages: 26

Extract:

9. Global financial regulatory reforms:
implications for East Asia
Douglas W. Arner and Cyn-Young Park

INTRODUCTION

The global financial and economic crisis that started in 2007 highlighted
gaps and weaknesses in the current international financial architecture
as well as national regulatory systems. Two major shortcomings in the
modern global financial system have shaped an array of possible regula-
tory, supervisory, and prudential reforms. First, supervisors failed to
limit excessive risk-taking and leverage by financial institutions. Market
failures, due in part to rapid financial innovation, discredited the regula-
tory model that relied on transparency, disclosure, and market discipline
to curb inordinate risk. Second, the absence of well-established crisis
management mechanisms both locally and internationally ­ revealed in
the failure to quickly address impaired financial institutions ­ sapped
confidence in the system.
Against this backdrop, the objective of global regulatory reform is to
build a resilient global financial system that can withstand shocks and
dampen, rather than amplify, their effects on the real economy. The goal
is to ultimately support vibrant economic activity and growth.1 There is
broad agreement on the key principles of reform ­ bolstering macropru-
dential supervision to reduce procyclicality and guard against a build-up
of systemic risk, extending the regulatory perimeter to include all systemi-
cally important financial institutions, improving international financial
standards, and strengthening crisis resolution mechanisms.
Lessons drawn from the recent crisis have led to specific reform propos-
als with concrete implementation plans at the international level. Leaders


1 See G-20, The G- ...