Regulatory Competition in Global Financial Markets

Georg Ringe

Research output: Other contributionNet publication - Internet publicationCommunication

Abstract

The decades-long discussion on the merits of regulatory competition appears in a new light on the global financial market. There are a number of strategies that market participants use to avoid the reach of regulation, in particular by virtue of shifting trading abroad or else relocating activities or operations of financial institutions to other jurisdictions. Where this happens, such arbitrage can trigger regulatory competition between jurisdictions that may respond to the relocation of financial services (or threats to relocate) by moderating regulatory standards. Both arbitrage and regulatory competition are a reality in today’s global financial market, and the financial sector is different from their traditional fields of application: the ease of arbitrage, the fragility of banking and the risks involved are exceptional. Most importantly, regulatory arbitrage does not or only rarely occurs by actually relocating the financial institution itself abroad: rather, banking groups tend to shift trading to foreign affiliates.
The decades-long discussion on the merits of regulatory competition appears in a new light on the global financial market. There are a number of strategies that market participants use to avoid the reach of regulation, in particular by virtue of shifting trading abroad or else relocating activities or operations of financial institutions to other jurisdictions. Where this happens, such arbitrage can trigger regulatory competition between jurisdictions that may respond to the relocation of financial services (or threats to relocate) by moderating regulatory standards. Both arbitrage and regulatory competition are a reality in today’s global financial market, and the financial sector is different from their traditional fields of application: the ease of arbitrage, the fragility of banking and the risks involved are exceptional. Most importantly, regulatory arbitrage does not or only rarely occurs by actually relocating the financial institution itself abroad: rather, banking groups tend to shift trading to foreign affiliates.
LanguageEnglish
Date20 Oct 2015
StatePublished - 20 Oct 2015

Cite this

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Regulatory Competition in Global Financial Markets. / Ringe, Georg.

2015, Blog.

Research output: Other contributionNet publication - Internet publicationCommunication

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AB - The decades-long discussion on the merits of regulatory competition appears in a new light on the global financial market. There are a number of strategies that market participants use to avoid the reach of regulation, in particular by virtue of shifting trading abroad or else relocating activities or operations of financial institutions to other jurisdictions. Where this happens, such arbitrage can trigger regulatory competition between jurisdictions that may respond to the relocation of financial services (or threats to relocate) by moderating regulatory standards. Both arbitrage and regulatory competition are a reality in today’s global financial market, and the financial sector is different from their traditional fields of application: the ease of arbitrage, the fragility of banking and the risks involved are exceptional. Most importantly, regulatory arbitrage does not or only rarely occurs by actually relocating the financial institution itself abroad: rather, banking groups tend to shift trading to foreign affiliates.

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