While the recent global financial crisis taught us several lessons, one key message has been the weaknesses in financial regulation. Greater belief on market discipline led to light touch regulation of financial entities. Even this was found onerous by many entities which shifted their activities outside the regulatory perimeter.
Coupled with inadequacies in the pricing and measurement of risks, this led to the build-up of substantial risk in the global financial system. Against this backdrop, I examine the rationale for regulation in the context of the debate and initiatives in the post-crisis period.