Financial regulation in the crisis regulation, market discipline, internal control: the big three in turmoil
The financial crisis has revealed the dysfunction of all banking and financial
regulatory mechanisms. Prudential regulationfailed to prevent the meltdown. Market
disciplineneglected to send any warning signals. Internal controlwas seriously undermined
by doubtful dealings, in France as elsewhere. Does the crisis call the big three into question?
No regulation mechanism is omniscient, whether it be state, market or self-regulation. As
such, none of three can operate without the other two, with the corollary that they can only
function together. It means that splitting up the big three can therefore not be the answer to
the crisis. By contrast, since each one of them has shown its weaknesses, the only solution
is to work on reinforcing each one. Unfortunately there is no guarantee that the reforms go
far enough.