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Others: A Theory of Financial Services Competition, Compliance and Regulation

TitleA Theory of Financial Services Competition, Compliance and Regulation
Authors
Keywordscompliance industry
banking regulation
optimum regulation
compliance capacity
Issue Date12-Feb-2015
AbstractDo financial regulation advisors help their clients become more profitable? In this paper, we present a model where financial service firms may add to their own compliance teams or hire outside compliance advisors. We derive the conditions under which a financial services firm will want to hire a compliance services company, and show how much money they should spend. Financial services firms in competitive locations like Hong Kong and Singapore will particularly benefit (at least in the short run) from their services. We also show that their advice may lead to an embarrass de riches – whereby the lower compliance costs and higher profit advantages they confer may lead to more regulation. Regulators may furthermore tighten regulation – with the expectation that financial service firms will adapt somehow. We present a fresh perspective on the Menon Hypothesis, deriving conditions under which financial regulations help the competitiveness of an international financial centre. We provide five potential policy responses for dealing with ever ratcheting financial regulations.
Persistent Identifierhttp://hdl.handle.net/10722/208417
SSRN

 

DC FieldValueLanguage
dc.contributor.authorMichael, Ben_US
dc.contributor.authorFalzon, Jen_US
dc.contributor.authorShamdasani, Aen_US
dc.date.accessioned2015-02-27T09:16:05Z-
dc.date.available2015-02-27T09:16:05Z-
dc.date.issued2015-02-12-
dc.identifier.urihttp://hdl.handle.net/10722/208417-
dc.description.abstractDo financial regulation advisors help their clients become more profitable? In this paper, we present a model where financial service firms may add to their own compliance teams or hire outside compliance advisors. We derive the conditions under which a financial services firm will want to hire a compliance services company, and show how much money they should spend. Financial services firms in competitive locations like Hong Kong and Singapore will particularly benefit (at least in the short run) from their services. We also show that their advice may lead to an embarrass de riches – whereby the lower compliance costs and higher profit advantages they confer may lead to more regulation. Regulators may furthermore tighten regulation – with the expectation that financial service firms will adapt somehow. We present a fresh perspective on the Menon Hypothesis, deriving conditions under which financial regulations help the competitiveness of an international financial centre. We provide five potential policy responses for dealing with ever ratcheting financial regulations.en_US
dc.language.isoenen_US
dc.rightsCreative Commons: Attribution 3.0 Hong Kong License-
dc.subjectcompliance industryen_US
dc.subjectbanking regulationen_US
dc.subjectoptimum regulationen_US
dc.subjectcompliance capacityen_US
dc.titleA Theory of Financial Services Competition, Compliance and Regulationen_US
dc.typeOthersen_US
dc.description.naturepostprint-
dc.identifier.ssrn2563981-
dc.identifier.hkulrp2015/001-

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