Book contents
- Frontmatter
- Contents
- Contributors
- Acknowledgments and Dedication
- PERSPECTIVES ON CORPORATE GOVERNANCE
- Introduction
- PART ONE THE BOARD OF DIRECTORS AND THE CEO
- PART TWO THE WHY, WHEN, HOW, AND HOW MUCH OF EXECUTIVE PAY
- PART THREE CONSTRAINING MANAGERS AND DIRECTORS: INVESTORS, SECURITIES REGULATION, AND THE MEDIA
- PART FOUR DELAWARE VERSUS CONGRESS: ON THE FEDERALIZATION OF CORPORATE GOVERNANCE
- PART FIVE COMPARATIVE CORPORATE GOVERNANCE
- 12 Regulatory Differences in Bank and Capital Market Regulation
- 13 European Corporate Governance after Five Years with Sarbanes-Oxley
- Epilogue: Three Secular Trends of Corporate Law
- Index
- References
12 - Regulatory Differences in Bank and Capital Market Regulation
Published online by Cambridge University Press: 04 August 2010
- Frontmatter
- Contents
- Contributors
- Acknowledgments and Dedication
- PERSPECTIVES ON CORPORATE GOVERNANCE
- Introduction
- PART ONE THE BOARD OF DIRECTORS AND THE CEO
- PART TWO THE WHY, WHEN, HOW, AND HOW MUCH OF EXECUTIVE PAY
- PART THREE CONSTRAINING MANAGERS AND DIRECTORS: INVESTORS, SECURITIES REGULATION, AND THE MEDIA
- PART FOUR DELAWARE VERSUS CONGRESS: ON THE FEDERALIZATION OF CORPORATE GOVERNANCE
- PART FIVE COMPARATIVE CORPORATE GOVERNANCE
- 12 Regulatory Differences in Bank and Capital Market Regulation
- 13 European Corporate Governance after Five Years with Sarbanes-Oxley
- Epilogue: Three Secular Trends of Corporate Law
- Index
- References
Summary
INTRODUCTION
It is well known that financial systems around the world can be roughly distinguished as either bank-based systems or capital-market-based systems. Whether and to what extent this distinction is meaningful is controversial. The answer depends upon what we consider. From a regulatory perspective, two prototypical forms of regulation correspond to the counterparts of this distinction, and thus we observe regulatory differences between the bank system and the capital market system.
In this chapter, I place particular emphasis on the costs of regulation and the enforcement thereof. I argue that these costs are important determinants when any given jurisdiction chooses a financial system. From this perspective, this chapter has two purposes. First, I briefly describe prototypical forms of regulation in the bank system and the capital market system. I also briefly discuss the change in the regulatory focus over time in both bank and capital market regulation. This change has resulted from environmental change in the banking and capital markets. Second, I examine the descriptive and prescriptive question of which system is, and should be, adopted in any given country once the costs of regulation and enforcement are seriously considered. The cost of writing proper regulation and the cost of enforcing such regulation are sometimes overlooked, but if these costs are taken into account seriously, we can better understand (as a descriptive matter) why the bank-based system is adopted in some jurisdictions and the capital market-based system is adopted in other jurisdictions.
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- Perspectives on Corporate Governance , pp. 399 - 412Publisher: Cambridge University PressPrint publication year: 2010
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