Financial services, financial firms and financial markets are regulated to a greater extent than most other products and services. In this radical book Professor George Benston provides a comprehensive critique of the justifications for financial services regulation, and provides an innovative proposal for reform.
Executive Summary
Financial services, financial firms and financial markets are regulated to a greater extent than most other products and services. Financial service regulation goes back centuries
It provides benefits to governments (for example, from direct and indirect taxation of banks) and to regulated financial institutions (which gain where entry is restricted).
Consumer protection is a common reason given for financial regulation. But consumers in financial markets are probably less subject to fraud, misrepresentation, discrimination and information asymmetry than consumers of other products.
Concern about 'negative externalities' (costs born by others) is another argument for regulation. However, on examination it is clear there are few