Today I would like to explore the market-based approach to financial regulation by considering its application to two important – but very different – types of financial institutions: commercial banks and hedge funds. For both types of institutions, market-based regulation has proven an effective supplement to (or substitute for) conventional command-and-control approaches.
First of all, globalization has the effect of easing upward pressures on prices worldwide. This can be attributed to the increased productivity and intensified competition between companies that have accompanied globalization, and to the large supply, based on low wages, of cheap goods now available.