Risk Management and Regulation
Oxford University Press
Faculty of Business and Law
School of Business / Markets and Services Research Centre
This chapter considers the management and regulation of risk for financial institutions within market settings, and the manner in which the regulatory authorities have responded to economic development and financial innovation. It examines the links between economic circumstances and regulation and the impact of the Great Depression and the aftermath of the Second World War. The relationship between financial innovation and regulatory changes is explored involving the concepts of regulatory dialectic and the functional view of regulation embodied by the successive Basel Accords. The discussion also considers risk metrics such as value-at-risk and the regulatory response to the recent financial crisis of 2007-2008.