COC

Assessing Regulatory Impacts on Banking Supervision and Credit Rating Agencies (April 2010)

Rethinking Bretton Woods | Thu, Jun 17, 2010

By Aldo Caliari

A new article by Aldo Caliari,  "Assessing Global Regulatory Impacts of the U.S. Subprime Mortgage Meltdown: International Banking Supervision and the Regulation of Credit Rating Agencies" is now available. The article has been recently published in academic journal Transational Law and Contemporary Problems, of the University of Iowa (Volume 19, Issue 1, Winter 2010).

Please find below quick summary and link to the article.

Summary

In 2007, a crisis in the subprime mortgage market in the U.S. began a financial crisis of global proportions. This Article looks at two areas where the U.S. subprime mortgage market crisis and its consequences triggered a debate that is paving the way for possible reforms. First, the U.S. subprime mortgage crisis caused a movement towards greater global regulation of international banking. Second, the U.S. subprime mortgage crisis forced investors and governments to reevaluate the role of credit rating agencies ("CRAs").

This Article explains the possible causes for the U.S. subprime mortgage crisis and suggest possible reforms to international finance. Part II reviews a wide range of explanations for the crisis. Part II further analyzes the wide consensus among experts that the U.S. subprime mortgage crisis interacted with a number of features of the global financial system, especially in the last few years, to produce the global financial crisis.

Parts III and IV survey the range of current actions and proposals to address the alleged failures, focusing on questions of further regulation and strengthened global institutional infrastructure. These sections review actions and proposals by international bodies such as the Financial Stability Forum ("FSF"), the International Monetary Fund ("IMF"), the Basel Committee on the Global Financial System, and the financial services industry. These sections also analyze the arguments concerning the proper amount of regulation necessary to promote prosperity while avoiding another economic crisis.

Part V compares the financial crisis today with the financial crisis in East Asia in the late 1990s. Law and policy makers proposed many of the same actions and regulations to fix the East Asia financial crisis that are being suggested today. Part VI compares the features of the current financial regulation debate against the actions taken in the late 1990s with regards to the East Asian crisis. Using the responses to the East Asian crisis as a guide, this Article tries to predict the possible outcomes of the current proposals. Part VII closes with some concluding remarks on the financial crisis.

Click here to read full article.