International initiatives in market regulation: the storm before the calm?

Abstract

Purpose

The purpose of this paper is to analyze causes and regulators' responses to the current international financial market crisis.

Design/methodology/approach

The paper discusses warning signs of the crisis in world financial services markets, principal underlying problems that have been identified, steps the financial services industry and its regulators are taking to address those problems, and the likely direction of future regulation.

Findings

More resource was put into structuring investment portfolios than in managing the risk positions those vehicles created. The problem with credit ratings was less in the actual ratings than in the meaning attached to them. Regulators were focusing mainly on credit and discovered they should have been worrying about access to liquidity; however, liquidity is difficult to regulate. The Financial Stability Forum has highlighted shortcomings in the way regulators cooperate across borders. The industry will not be allowed to sort this out by itself. Increased bank capital requirements and tightening of regulations on structured or off‐balance‐sheet vehicles are likely.

Originality/value

The paper is an overview and insight from experienced financial services lawyers.

Citation

Grieve, C., Gleeson, S. and Crown, S. (2008), "International initiatives in market regulation: the storm before the calm?", Journal of Investment Compliance, Vol. 9 No. 4, pp. 5-8. https://doi.org/10.1108/15285810810922198