How Should We Regulate the Financial System?

In this chapter, the focus is on the areas where my work offers the greatest departure from current practice and thinking. I will show that a reinvention of financial regulation can deliver a financial system that is less prone to crash and can do this without ossifying finance. It will achieve these goals because it is better at managing financial risk across the financial system.

In Chapter 2, I identified the two principal aims of financial regulation as containing systemic risk and protecting consumers protection. In Chapter 3, I argued that, today, understanding how to contain systemic risk is the greater challenge for policy makers. Consumer protection is an equally vital objective ...

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