Learning Objectives:

  • Understand the rationale for financial regulation.

  • Describe the key regulatory frameworks: Basel, Dodd-Frank, and CRD.

  • Analyse the role of supervisory authorities.

6.1 The Rationale for Financial Regulation

The course requires students to “evaluate the case to correct market failure through regulation and supervision” . The ESX Academy module covers “the importance of ethics in financial markets to ensure integrity and trust in financial transactions” .

Key Rationales for Regulation:

  • Systemic Stability: Preventing the failure of individual institutions from triggering a broader crisis.

  • Protection of Depositors: Safeguarding depositor funds.

  • Consumer Protection: Preventing unfair, deceptive, or abusive practices.

  • Market Integrity: Ensuring fair and transparent financial markets.

The course notes that “the 2008 financial crisis illuminated the most weak points in regulation, accounting, risks analysis, and other aspects of banking” .

6.2 Key Regulatory Frameworks

The course covers “the latest development on Basel III and Dodd-Frank Wall Street Reform and Consumer Protection Act” . The HSE course requires students to “distinguish peculiarities of Basel I, Basel II and Basel III” .

Basel Accords: International standards for capital adequacy and risk management. The National University Library’s FIN453 module identifies “Chapter 3: Bank regulatory capital and the Basel Rules” as a core textbook chapter .

Dodd-Frank Act: US post-crisis reform legislation that established the CFPB and introduced the Volcker Rule.

CRD IV/CRR: European implementation of Basel III through the Capital Requirements Regulation and Directive.

MiFID II: European securities regulation that mandates transparency and investor protection.

6.3 Supervisory Authorities

Key supervisory authorities include:

United States:

  • Federal Reserve

  • Office of the Comptroller of the Currency (OCC)

  • Federal Deposit Insurance Corporation (FDIC)

  • Consumer Financial Protection Bureau (CFPB)

  • Securities and Exchange Commission (SEC)

Europe:

  • European Central Bank (Single Supervisory Mechanism)

  • European Banking Authority (EBA)

  • European Securities and Markets Authority (ESMA)

United Kingdom:

  • Prudential Regulation Authority (PRA)

  • Financial Conduct Authority (FCA)

  • Bank of England

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