Jump to ContentJump to Main Navigation
Global Governance of Financial SystemsThe International Regulation of Systemic Risk$
Users without a subscription are not able to see the full content.

Kern Alexander, Rahul Dhumale, and John Eatwell

Print publication date: 2005

Print ISBN-13: 9780195166989

Published to Oxford Scholarship Online: September 2007

DOI: 10.1093/acprof:oso/9780195166989.001.0001

Show Summary Details
Page of

PRINTED FROM OXFORD SCHOLARSHIP ONLINE (www.oxfordscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 29 May 2020

Incentives versus Rules

Incentives versus Rules

Alternative Approaches to International Financial Regulation

(p.174) 6 Incentives versus Rules
Global Governance of Financial Systems

Kern Alexander (Contributor Webpage)

Rahul Dhumale

John Eatwell (Contributor Webpage)

Oxford University Press

This chapter considers the role of market discipline and whether it can be relied upon as the only tool of financial regulation. It argues that if this is true, there needs to be at minimum an incentive-compatible framework in place a priori. The chapter begins by briefly considering the “incentive problem” in regulation using a principal-agent framework. It then considers the design of an incentive-compatible regulatory system that encourages prudent behavior and efficient financial intermediation. The discussion continues by assessing the nature of the tradeoff between incentive- and rule-based regulation by analyzing the interaction between regulatory and agency incentives. The chapter concludes by considering the challenges in designing appropriate incentive mechanisms to regulate financial markets through market discipline.

Keywords:   market discipline, financial regulation, incentive-based regulation, rule-based regulation, financial markets, incentives

Oxford Scholarship Online requires a subscription or purchase to access the full text of books within the service. Public users can however freely search the site and view the abstracts and keywords for each book and chapter.

Please, subscribe or login to access full text content.

If you think you should have access to this title, please contact your librarian.

To troubleshoot, please check our FAQs , and if you can't find the answer there, please contact us .