LL4BF      Half Unit
International Financial Regulation

This information is for the 2025/26 session.

Course Convenor

Availability

PURPOSE OF THE COURSE

This course takes financial stability as its starting point and poses the question of how best to preserve it. Regulatory responses have evolved significantly since the global financial crisis of 2008–2010, and parts of the post-crisis framework are still being implemented. At the same time, the lessons drawn from that crisis are already being tested in a world marked by declining international co-operation (e.g. Brexit, the Trump administration), the fallout from war and the pandemic, and profound structural shifts in the market, including the increasing role of digital finance and the accompanying changes in market practices and risk distribution.

Financial stability, however, is not the sole rationale for financial regulation. Growth-driven economies depend on innovation and market efficiency as much as on stability. Consequently, the regulatory framework must balance these objectives, ensuring that regulation enables—or at least does not inhibit—new market developments and innovation (such as digital assets, the use of AI, and technology-driven changes to value chains).

In the first, general part of the course, we will examine the fundamentals of policy-making in financial regulation—namely, the ‘why, how, and who’. Participants will explore the underlying rationales for regulation, including market efficiency, systemic stability, consumer protection, and ESG (environmental, social, and governance) considerations, and how these inform policy choices.

We will then identify and scrutinise the key tools regulators employ to achieve their goals, particularly those aimed at embedding resilience in the system—such as capital buffers and cyber resilience measures—together with the use of risk models and management frameworks (for both financial and ESG risks), disclosure obligations, and governance standards for investors and counterparties.

Further, we will investigate the institutional architecture of financial regulation and supervision—who makes the rules and how they are enforced. Two central questions will be considered: first, the interplay between national and international or supranational authorities; and second, the relationship between the traditional domain of financial regulation and adjacent regulatory areas, such as competition law, data protection, and access to information.

This section will also explore the issue of *to whom* regulation should be addressed—whether to entities or to the activities that give rise to risk. The challenge of navigating between entity-based regulation (e.g. banks, investment firms) and activity- or risk-based approaches is further complicated in the age of FinTech, where new entrants may perform similar functions to traditional institutions but in markedly different organisational forms.

In the second, more focused part of the course, attention will shift to specific regulatory areas. Participants will engage with some of the most debated issues in post-crisis financial regulation—topics that have profoundly reshaped how risk is measured, managed, and mitigated. These include banking and financial stability, the Basel capital accords, bank resolution frameworks, shadow banking (or non-bank financial intermediation), and credit rating agencies. Each of these areas has undergone substantial reform since the crisis; yet critics argue that the revised regimes may have replaced old problems with new ones. Fundamental concerns regarding moral hazard, systemic risk, and the preferential treatment of banks remain unresolved. Although the regulatory framework has, thus far, weathered the economic pressures of the Covid-19 pandemic and the geopolitical disruptions caused by Russia’s war of aggression against Ukraine and the retreat from multilateralism under Trump, significant challenges persist.

In the third part of the course, we turn to the regulatory task of organising a market undergoing rapid transformation—characterised by evolving value chains, platformisation, and new financial instruments such as so-called ‘stablecoins’. These developments carry growing disruptive potential in terms of financial stability. Once again, regulation is being tested and, to date, appears ill-equipped to shape markets in a way that satisfactorily aligns with the goals of market efficiency, systemic stability, and consumer protection.

Which jurisdiction?

The course takes an international perspective, drawing primarily on standards set by global bodies (such as the FSB, Basel Committee, and CPMI) and regulatory developments in the EU, the UK, and the US. It does not focus in detail on any one jurisdiction.

What you will learn

The aim is to equip participants from any jurisdiction with the ability to understand and contextualise the principal mechanisms of the financial market and of financial regulation. The evolution of today’s most pressing regulatory topics is an inherently international process, and this course prepares participants to engage meaningfully in those discussions. By combining a general conceptual framework with selected specialised topics, the course enables participants to navigate the complex landscape of current and emerging financial regulation—without needing to wade through the minutiae of technical legal provisions.

OVERVIEW OF LECTURES

First part: General Themes

Lecture 1: Introduction – The Anatomy of the Financial Market and the 2008 Financial Crisis

• Mapping the financial market
• Who is regulated, and why?
• Introduction to the 2007-2010 Financial Crisis
• Identification of main crisis accelerators
• The emergence of FinTech and the entry of new agents

Lecture 2: The ‘Why’ – Rationales for Regulating the Financial Market

• Market efficiency and growth
• Systemic stability
• Consumer Protection
• ESG (environmental, social and governance-related goals)
• Different types of risk: Counterparty risk, operational risk and systemic risk, etc, the principal/agent problem

Lecture 3: The ‘How’ – Key Elements and Tools of Financial Regulation

• Risk measurement and risk management
• The efficiency of ‘Value at Risk’ and other risk models
• Disclosure to retail and institutional clients
• Resilience of intermediaries and infrastructures
• Rules imposing risk-conscious internal management
• Governance and conduct

The ‘Who’: Global and EU Regulatory and Supervisory Structure

• Financial Stability Board and G20, Basel Committee and CPMI
• EU Institutions and ECB
• National Supervisors and Regulators
• Macro and integrated supervisory and regulatory structures

Second Part: Specific policy areas

Lecture 4: Banking and Financial Stability, Prudential Regulation

• The role and importance of banks
• Soundness, safety and resilience of banks
• The role of regulatory capital
• The micro and marco-prudential sides of bank regulation
• Policy axioms and international co-operation

Lecture 5: The Basel Bank Capital Accords: Sophistication vs. Efficiency?

• From Basel I to Basel II
• Basel III to Basel III.1: Post-crisis developments
• From capital standards to leverage and liquidity standards
• Critique and outlook

Lecture 6: Regulating Shadow Banking

• ‘Shadow banks’ and shadow banking
• Maturity, liquidity and credit transformation, risks
• Other risks
• Regulation following FSB standards and monitoring

Lecture 7: Bank resolution: what we learned from Lehman Bros.

• The notion of systemic risk and systemic importance
• Strategies to avoid systemic risk from harming the economy
• Bail-out vs bail in
• The bank-resolution toolbox

Lecture 8: Rating Agencies: Disdained Gatekeepers

• Rating agencies’ pre-crisis implications
• Inefficiencies and conflicts
• Regulatory strategies

Third Part: Evolution of value chains in financial services

Lectures 9 – Systemic stability considerations regarding ‘BigTech’ and ‘platforms’

• Social channel for risk propagation
• Case studies: Gamestop/Robinhood; Silicon Valley Bank
• Technological channel for risk propagation
• Regulatory techniques to address operational risks and improve resilience, including via the regulation of new actors (third party technology providers)
• Regulating the governance of outsourcing

Lecture 10 – Stability aspects of the so-called ‘crypto’ market

• Different types of crypto assets, in particular so-called ‘stablecoins’
• Different types of crypto-asset services
• Reallocation of value in the system
• Interconnectedness of ‘stablecoins’ with regulated financial services
• Monetary policy

6 hours of seminars and 20 hours of lectures in the Winter Term.

This course has a reading week in Week 6 of Winter Term.

This course will have a two-hours lecture each week plus a one-hour tutorial (small group) session in weeks 1, 3, 5, 7, 9, 11 in Winter Term. There will be a Reading Week (no lectures or tutorials) in Week 6 of Winter Term.

All students are expected to produce one 2,000 word formative essay during the course. 

A full reading list will be distributed during the course. All materials are available electronically. In addition, the students will be invited to do independent reading. A good general introduction is J. Armour et al, Principles of Financial Regulation, OUP 2016 (paperback, also available as e-book via library login)

Exam (100%), duration: 150 Minutes in the Spring exam period