Shareholder Liability: A New (Old) Way of Thinking about Financial Regulation

In the wake of a series of crises, international and domestic financial regulation has become highly complex and prescriptive, but doesn’t address the fundamental issues behind the crises, according to a report released today by the C.D. Howe Institute.  In “Shareholder Liability: A New (Old) Way of Thinking about Financial Regulation,” author Finn Poschmann finds the regulations ignore history and human behavior. He recommends greater reliance on an incentives-based approach for financial institutions, which shares the risks among bond buyers, shareholders and depositors, as a better backstop to financial stability.