The optimum regulatory model for the next millennium-lessons from international comparisons and the Australian-Asian experience

Abstract

The view of the systemic crises in Asian economies as being a currency crises ignores the OECD's analysis of crises developed post 1987. Australia's experience in the last decade has been replicated by Asian economies in a maturation phase in the nineties - failure to impose strong prudential measures while not liberalising protective measures led to an incorrect regulatory model being imposed on the key banking sector. This paper discusses the range of regulatory models, putting forward a new taxonomy and applying it internationally. It then describes the OECD's view of systemic crises and the performance of various regulatory models in withstanding them. From a methodology of assessing performance of a financial system applying microeconomi c criteria used by regulators, credit agencies and investment houses, it is then postulated that it is possible to theoretically and empirically derive an optimum regulatory model.