Fiscal Regulation and Public Policy

We are just starting to see conducts on earth of financial innovation reverting to old methods and practices, as the recent financial crisis begins to fade from memory. Could it be a great thing? Possibly…

However, misunderstood fiscal innovations such as securitization, which led through the sub-prime debacle in America to the financial disaster, pose an ever present risk to the financial business. Regulators and managers everywhere, as protectors of the various elements of the entire world’s financial system, do still not clearly understand the implications of fiscal innovation. Often overly this really is clouded by public policies which as the foundation for such supervision are suspect as to which “public” they are designed to benefit. This is especially the case in the uses of technology in the supply of financial services.

The word “innovate” means to bring in novelties or to make changes. This simple definition is extended by monetary initiation to the fiscal world. Nonetheless, here the simplicity ends with a plethora of procedures, goods and methods which were applied to the spectrum of the fiscal world – some good and a few bad.

What drives financial innovation? Simply place – self interest, which finds expression through Adam Smith’s “invisible hand”. Financial institutions seek out, the best cost effective way to maximise their profits either, through the progressive procedure.

You can find two basic drivers of fiscal innovation which result in the impediments that a bank faces in achieving its monetary aims – competition and regulation. To defeat these barriers banks participate in completion of two forms – circumventive or competitive.

The second, circumventive, is a bit less specific. In most jurisdictions fiscal companies are faced by an array of regulations and rules, imposed by the banking and regulatory authorities how they run their business. All these would be the regulatory barriers that the bank faces. These obstacles may frequently be overcome by innovation – therefore the term “circumventive innovation”.

The theory was immediately picked up, first in Europe, and then globally as a competitive initiation. European banks had no restrictions on the number of branches they could have but labour policies created limitations on for example working hours among many other issues. In the ATM the European banks found a new “staff member” who (1) was more economical than a human teller, (2) could work all day as well as night, (3) was accurate, (4) didn’t require a physical branch to support it. There have been many other plusses a nicely, as well as the power to broadly expand the range of products that could be offered.

In essence, one kind of innovation morphed into another (competitive). This interaction is a key characteristic of the dynamics of a financial system that is continuously evolving and goes on continuously. And technology continues to be a top driver of the method. We view this in action all of the time in many different manners.

Random Posts

  • Public Policy and Free Markets
    Most Americans don't concern themselves with economic matters, plus they leave the decision-making as much as other folks along with the politicians which they feel are better fit than them, who bette...
  • Protect Your Kids With Portable Bug Screen Doors
    Keeping bugs out of a house is a simple concept that is not constantly easy to attain. The portable bug screen door can assist a lot more effectively than a traditional metal or wood framed screen doo...
  • Our Freelance Web Developer Can Help You Develop a Great Website
    In a globe where search results issue, it is very important to be ranked near the top of the list on an internet search engine. This means that to develop a web site appropriately, you need material t...
  • Make The Effort To Explore An Office For Rent
    Do you desire a workplace that lies on Beach Road? Perhaps the Bukit Timah Road is a lot more to your taste? If you choose an economical option, there is the old Gan Eng Seng Secondary school availabl...
  • The World In The Eyes Of A Commercial Photographer
    To obtain started properly as a Singapore business professional photographer, it is excellent that you get the right kind of training. Mastering electronic photography is critical if you're going to f...

Next post: