Takeaways for BGR MBA Class of 2015

BGR - Session 6

Reading:The 2007-208 Financial Crisis: Causes, Impacts and the Need for New Regulations IVEY, 2008: 908N14(An analysis of the recent global financial crises and the emerging regulatory approach to deal with the causes of this crises)

Takeaways

It is important for businesses to fully understand the scope and effaciousness of the legal and regulatory framework, including, most importantly, the quality of enforcement. Badly conceived or poorly implemented regulation is worse than no regulation --- in either case, protective measures may be necessary, as also, perhaps, an element of self discipline.

Invariably hype, over-confidence, over-trading, and excessive risk taking precede a financial crises like the recent 2007-8 crises which began in the US with global contagion effects. The precise causes and nature of a financial crises are almost always unpredictable. It is believed, in retrospect, that the belittling and deriding of sectoral regulation (like bank regulation, securities regulation etc.) and the discouragement and weakening of antitrust enforcement led to excesses, imprudence, and a precipitation of systemic risks which were at the root of the 2007-8 crises.

Countries with a sound regulatory framework and capable regulators are often able to mute an on settingcrises or deal with it effectively if it occurs. Such environments are always more stable and hence attractive for businesses. It is in the interest of business enterprises to encourage Governments to put in place effective laws and regulations, implemented and enforced by capable and independent regulators.

The history of regulation is that it evolves from crises to crises, often in an essentially reactionary mode -- regulatory measures taken after a financial crises are often reactionary and usually do not solve the entire problem.

BGR MBA Class of 2015 (Semester IIIB Nov 5 Dec 27, 2014)