Approaches to Financial System Regulation: An International Comparative Survey


by Dr. Andrew D. Schmulow

SSRN Electronic Journal, 2015.

This article provides an analysis of the four systems 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 the superior method of financial system regulation. However, this paper 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 of the UK financial regulatory system, 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.

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Also published as a working paper in “Research Working Paper Series, Centre for International Finance and Regulation (CIFR) “.