Towards a Fundamental Understanding of Financial Sector Developments
Volume: 17 Topics in Corporate Finance
Price: € 20.00
By Frank Partnoy, Arnoud W.A. Boot and Anjan V. Thakor, 2009
The functioning of the financial system has become one of the most acute public policy issues of our time.
The financial crisis that confronts the world since the middle of 2007 points at the need for reform of the financial system. For this reason the Amsterdam Center for Corporate Finance has dedicated this issue of its Topics in Corporate Finance series to analyzing two key questions for the design of the financial system: i. How should we reform the role of credit rating agencies? And ii. How should we deal with the increasing integration and interlinkages between financial institutions and markets?
In the first two chapters of this publication, Frank Partnoy, Professor of Law at the University of San Diego School of Law, addresses the first question relating to the role of credit rating agencies. In the first chapter Partnoy explains why credit rating agencies are at the heart of the current credit crisis. In the second chapter he provides an in-depth analysis of the role of credit rating agencies and the regulatory framework surrounding them. He also puts forward fundamental reform proposals that could solidify their role. This contribution was part of Professor Partnoy’s presentation at an ACCF symposium last July. Professor Partnoy very early on started pointing at the underlying risks in the financial sector. It is unfortunate that a crisis is needed to bring his ideas to the forefront.
The third chapter, entitled ‘The Accelerating Integration of Banks and Markets and its Implications for Regulation’, is an extensive analysis of the profound academic work that has been done on the integration of financial institutions and markets. The authors, Arnoud Boot and Anjan V. Thakor, a finance professor at the Olin School of Business (Washington University, St. Louis), show that the complexity of the financial sector creates virtually insurmountable regulatory and supervisory challenges. They offer several avenues forward.
This publication aims to build a further understanding on what is needed to rectify the weaknesses in the financial sector. We hope you enjoy reading it, and that this publication may contribute to bridging the gap between theory and practice.