Explaining how to avoid the next financial crisis:

A regulatory regime with “teeth”
- You don't need to prevent regulatory arbitrage between many countries
  - Tax havens. Pick safe countries
- go to capital crosses borders to find lightest regulations
- require stricter rules regarding leverage & capital adequacy
  - Or more reserves

Solutions

Expert Solution

1. Regulatory regime with teeth means "Strong and poweful regulators". This can be understood in the time of financial crisis of 2008 there was a need grown for having a regulator which should be sufficiently powerful to avoid the crisis caused due to poor oversight by current regulators.

2. Regulatory arbitrage means to utilise more favourable laws in one jurisdiction to circumvent less favourable laws of other jurisdiction where laws are quite unfavourable.

3. Capital adequacy means statutory minimum amount of reserves of capital kept by a bank or financial instituion. This amount will be needed to deal with the uncertain times.

Rahul Sunny answered 1 year ago

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