PowerPoint Show from Caspar's Inaugural lecture
The financial crisis has revealed that the current financial regulation has been insufficient to avoid or reduce the negative externalities from systemic risks. There is no doubt that the current financial regulation especially in the US has not been able to adequately deal with issues such as short sale, credit default swaps, hedge funds, off- balance items etc. Moreover, the crisis has revealed that there is a need for better regulation, also in Denmark regarding topics such as: banks’ sale of their own shares as well as giving proper financial advice to bank customers. However, it is important to underline that better regulation does not necessarily mean more regulation which tends to follow immediately after a crisis. Instead, one needs to carefully analyze how new legal provisions change the incentives of the financial market participants, which is a key issue in Caspar’s research activities.
Optimal rules need to be combined with sound governance structures, that align the interests of shareholders and management. As a result, financial institutions need to reconsider whether their existing corporate governance policies are adequate. For instance, should boards become more actively involved in the risk management process, and if so, do we need to change the structure of the present board system? Such important questions are complex and cannot be fully analyzed in an inaugural lecture, but Caspar presented his view on how to regulate a number of relevant topics.
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