Whitepaper - Convergence of risk and regulation
This report is not about policy. It is about reforming the analytical fundament of regulation which will set regulators at par in terms of knowledge with CRO's. We call it 'new' regulation.
Times have changed and although we may be going back to the 'old' way of banking, the 'old' technology isn't going to be able to support it.
| Table of Contents | |
|---|---|
| Section 1 | The current situation. |
| Section 2 | We describe in the second section what is meant by 'new' regulation, by comparing it with 'old' regulation. Where old regulation focused on value, new regulation focuses on value change - given some adverse market conditions. We then argue that new regulation - in order to live up to its task and to be efficient - must be based on the same principles as modern risk management - or even wider - modern financial analytical systems. |
| Section 3 | We explain in the third section the main principles of such a system. |
| Section 4 | In the fourth section we derive the data that is needed for the new regulation. It will become clear that the missing item is a clear definition of a financial contract. We will discuss why it is necessary to standardise the idea of financial contracts in terms of Contract Types (CT) and the necessity of making this information available not only to regulators but to whoever trades in these contracts. We also discuss possible problems arising from the new paradigm which is the power of the system and its transparency. This calls for meta regulation in order to guarantee the right use of the data. |
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