The four methods of financial system regulation: An international comparative survey

by Dr. Andy Schmulow

This article provides a description of the four methods of financial system regulation currently in use internationally, with case studies illustrating each system. Analysis is provided of the strengths and weaknesses of each. Research indicates that the “Twin Peaks” system is superior to its peers. However, this article also concludes, by reference to failings observed in “Twin Peaks” arrangements to date, that “Twin Peaks” alone is no panacea against financial crises, or market and consumer abuse. It is merely the best form of regulatory architecture. Other factors, such as the capacity and willingness of the regulators to discharge their mandate, even within a sound regulatory architecture, are as important to the success of financial system regulation, as evidenced by the failures in the United Kingdom around the time of the global financial crisis, and as evidenced by the success of the Monetary Authority of Singapore, despite Singapore’s sub-optimal regulatory structure.