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This
is the Per Jacobsson Foundation Lecture
2012 delivered by the author at Basel,
Switzerland. Against the backdrop of the
global financial crisis and related crisis-management
policies, three inter-related issues in
the domain of the future of finance that
are of operational significance to central
banks at the present juncture are addressed:
(a) how to ensure that the financial sector
serves the society better; (b) how to
integrate financial sector policies better
with national economic policies; and (c)
how to ensure that the financial industry
functions as a means and not as an end
in itself?
While public policy failures –
including by public authorities in major
financial centres who genuinely believed
that the financial system, even in its
complex evolution, was contributing to
the public good – cannot be wished
away, the biggest challenge for the future
of finance lies in designing governance
practices that avoid the dangers of comprehensive
regulatory capture. Approaches to regulation
of the financial sector will continue
to be national, in a global environment
that is not necessarily favourable. In
this regard, consideration of regulation,
competition and ownership in the financial
sector in an integrated manner, enhanced
monitoring of financial market activities
and the use of fiscal tools to supplement
regulation could be helpful.
July
12, 2012.
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