2. THE CHOICE OF FINANCE AND ITS REGULATORY IMPLICATIONS
Unlike the US, Europe is by and large a bank-based system. Despite the fact
that the liberalisation of European financial markets in the single market
programme and the start of monetary union were intended to stimulate direct
market financing, the effects have been limited so far. Total assets of the
banking sector in the EU, measured as a percentage of GDP, have risen from
161% in 1990 to 239% in 2001. In contrast, total assets of US commercial banks
stood at 78% of GDP in 2001, increasing slowly from 59% in 1990.
1
Moreover,
the total value of US bonds and equity outstanding in the markets, measured as a
percentage of GDP, is roughly twice as large as in the EU.
From a corporate finance perspective, such a situation is not very efficient.
The banking market may be dominated by a few players, who may not be
interested in financing certain higher-risk segments of the market. They may
also charge too high a price for underwriting certain risks. A market-based
system or an environment that offers the choice of both systems mitigates this
problem.
From a regulatory perspective, however, establishing the regulation for a
bank-based system is simpler and less costly compared to a market-based
system. It suffices to set a crude minimum capital ratio and to have some risk
weighting of the different asset classes, as set in the 1988 Basel Capital Accord.
It also requires a small group of supervisors to enact this agreement.
The regulation and supervision of a market-based system, on the other hand,
are much more complex, multi-layered and costly requiring years, if not decades
to put in 本文来自辣.文,论-文·网原文请找腾讯752018766 agencies and stock exchanges. They put
their reputation at stake when supporting a certain security. These intermediaries
reap the benefit, or bear the cost, of supporting any security. The second tier of
intermediaries consists of investment and pension funds, which provide market
demand for securities, and the financial press. The corporate scandals in the US
have amply demonstrated the importance of these “reputational intermediaries”,
but also the fragility of such a structure.
The regulation of a market-based system requires active participation of
self-regulatory organisations (SROs). They control the intermediaries and can
be subdivided into voluntary (professional organisations) and mandatory (SROs
mandated and controlled by the government) organisations. By law,
intermediaries are liable for faulty information or fraudulent practices.
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