7: Economics of Regulation

Question 1

Result of actions by regulators to attract certain entities or encourage behaviors

Answer 1

Regulatory Competition

Question 2

• Regulated bodies are influenced/controlled by the regulated industry
• regulation is to enhance the interests of the regulated

Answer 2

Regulatory Capture

Question 3

Occurs when businesses shop for a country that allows for specific behavior, rather than changing their behavior

Answer 3

Regulatory Arbitrage

Question 4

Requires regulators to revist the cost benefit analysis based on actual outcomes before renewing the regulation

Answer 4

Sunset clause

allows for evaluation of unexpected effects

Question 5

Bail-in policies are intended to insure that shareholders and creditors of the failed institution…

Answer 5

shareholders & creditors pay the costs of failure
(not the tax payers/government)

Question 6

Bail-in policies limit disruption to customers by….

Answer 6

keep the institution operating (rather than liquidation)