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ICFR Publication - The Making of Good Financial Regulation

Towards a Policy Response to Regulatory Capture    

Date: 25 June 2012

The interaction between policymakers and market participants in the regulation of financial markets is marked by a paradox. In a dynamic and technically complex environment such as the financial markets, regulatory authorities are required to develop a constant and close interaction with the market participants under their surveillance in order to stay abreast of rapidly changing financial markets, to monitor the build-up of risks, and to understand the impact of their regulatory policies. However, the same proximity between regulators and market actors that is required for regulators to effectively perform their responsibilities has also been described as opening the regulatory process to the risk of unduly favouring narrow industry interests at the expense of the public. This distortion in the regulatory process is commonly defined as “regulatory capture”.

What aspects of the relationship between regulators and financial industry groups are conducive to the development of effective regulatory policies and what are instead conducive to regulatory capture? And what mechanisms can be put in place in order to mitigate the risks of “regulatory capture” and to strengthen the integrity of the policymaking process?

The ICFR has invited a select group of high-profile commentators from academia, the regulatory community, and the financial industry and other stakeholders  to discuss these questions and identify a policy agenda to mitigate risks of regulatory capture... Read more   

Table of Contents   

1.     Mitigating Capture in Financial Regulation - Stefano Pagliari

Section 1: An Academic Perspective 
2.     Understanding Regulatory Capture: An Academic Perspective from the United States - Lawrence Baxter     
3.     Lessons for the Financial Sector from ‘Preventing Regulatory Capture: Special Interest Influence, and How to Limit It’ - Daniel Carpenter, David Moss and Melanie Wachtell Stinnett 
4.     Who Mobilizes? An Analysis of Stakeholder Responses to Financial Regulatory Consultations - Stefano Pagliari and Kevin Young 
5.     Regulatory Implementation and Capture - Andrew Walter
Section 2 – A Regulator’s Perspective  
6.     Regulatory Capture, Political Dominance or Collective Intellectual Failure?  A View from a Former UK Regulator - Clive Briault  
7.     Regulatory Capture and Global Standard Setters - Jane Diplock 
8.     Political Capture and the Regulatory Cycle: How Should It be Addressed - David Green
9.     Regulatory Capture: a Former Regulator’s Perspective - Andrew Sheng
10.  Managing the Risks of Regulatory Capture - David Strachan    
Section 3 – A Stakeholder’s Perspective
11.  Addressing the Problem of Cyclical Capture - Gerry Cross  
12.  Ensuring the Consumer Voice is Heard - Christine Farnish   
13.  The Experience of Non-Financial End Users - Richard Raeburn  
14.  Lessons from the Experience of the UK Financial Sector - Adam Ridley 
Section 4 – Lessons from Outside Finance 
15.  Regulatory Capture: A Perspective from a Communications Regulator - David Currie
16.  Lessons from the Regulation of the Energy Sector - John Mogg 
17.  Regulatory Capture in Finance: Lessons from the Automobile Industry - Tony Porter

Printed Copy of the Publication 

To pre-order a printed copy of this publication please contact Sandra Glavan at [email protected]. Estimated retail price £9.99.

Download the Publication    

 The Making of Good Financial Regulation, Towards a Policy Response to Regulatory Capture 


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