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Explore the impact of financial regulation on society, the role of regulators, Canadian case study, and the importance of social responsibility in finance. Discuss how research influences regulatory practices and promotes economic stability.
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Social Responsibility in Financial RegulationResponsabilité sociale en matière de réglementation financière Knowledge Mobilization and the Impact of Research in a Liberal Arts Institution James Addis
Introduction: la finance et la société • Suite de la crise de 2007-2008: la finance est-elle au service de la société? • Ce n’est pas clair qu’elle promeut la prospérité pour tous • Recherches conjointes avec Prof. Ian Roberge • Rôle des régulateurs dans la promotion d’un secteur financier socialement responsable • À quoi se ressemblerait un régulateur financier socialement responsable? • Le cas canadien: comme d’habitude, ou le début de la responsabilité sociale?
Why does finance matter? • Underpins economic growth (see Stiglitz et al. 2009): • Investment activity takes place via the financial sector • Facilitates efficient allocation of resources • Distribution of risk • However, finance’s impact is not wholly positive • As seen in the 2007-2008 crisis • Improperly regulated finance can drive recessions (see for example Minsky 1992)
Objectifs de la réglementation financière • Donc, la réglementation financière est nécessaire! • La réglementation: un élément constitutif du marché (Vogel 2014) • Deux objectifs principaux de la réglementation financière aujourd’hui: • Efficacité et stabilité systémique • Protection des consommateurs
Role of objectives and mandates • Mandate: defines the regulator’s responsibilities, aims and scope of action • Objectives and mandates determine regulatory practices • And thus economic and social outcomes • See diagram
Social responsibility in detail • Social responsibility implies changes to objectives and mandates • Promote the wellbeing of citizens (in the short run and long run) • Encourage growth in the real economy • As compared to speculation, other ‘socially useless’ financial activity • There is “an under-appreciation by academia of how, without proper rules, finance can easily degenerate into a rent-seeking activity” (Zingales 2015, 1)
Le cas canadien • Étude de cas qualitative de trois régulateurs canadiens: • OSFI: Office of the Superintendent of Financial Institutions – banques • CMHC: Canadian Mortgage and Housing Corporation – financement du logement • CSA: Canadian Securities Administrators – valeurs mobilières • Éléments que nous avons considéré: • Discours publique • Pratiques réglementaires • Très peu de mouvement vers la responsabilité sociale par les régulateurs • Considération d’une nouvelle approche, mais peu de pas vers le véritable changement
Knowledge Mobilization • Our focus: how do financial regulators do their work? How could they do it better? • Direct implications for policymakers • Engagement with the nuts and bolts of real-world policymaking • Such research requires interdisciplinary expertise • Political science, public policy, public administration, economics, business and finance • Greatly facilitated by working at a liberal arts college • Cross-disciplinary interaction between researchers in social science subject areas
References • Minsky, Hyman P. 1992. ‘The Financial Instability Hypothesis’. Economics Working Paper Archive. Levy Economics Institute. https://econpapers.repec.org/paper/levwrkpap/wp_5f74.htm. • Stiglitz, Joseph E., Amartya Sen, and Jean-Paul Fitoussi. 2009. ‘The Measurement of Economic Performance and Social Progress Revisited’. OFCE. https://www.ofce.sciences-po.fr/pdf/dtravail/WP2009-33.pdf. • Vogel, Steven. 2010. ‘A Socio-Economic Perspective on the Financial Crisis’. Socio-Economic Review 8 (3): 553–57. https://doi.org/10.1093/ser/mwq009. • Zingales, Luigi. 2015. ‘Does Finance Benefit Society?’ Working Paper 20894. National Bureau of Economic Research. https://doi.org/10.3386/w20894.
