Abstract:

Asset price bubbles and following deep financial crisis have occurred in the past three decades with an increasing frequency. The past regularity framework was obviously not sufficient to stabilise the worldwide financial system. Therefore, after the recent big financial crises that took its course from 2007 onwards, financial regulations have been reformed once again in order to protect governments, tax payers and financial service consumers from abusive practices by banks and other financial market participants. Since then, several years have passed and it is now a good time to come up with an assessment of what has been achieved so far. The paper starts with an analysis of the regulatory weaknesses before the financial crises started to spot the necessary changes. In the next step, the recent reforms will be explained their effectiveness analysed. The problem of international divergence of reforms will be stressed in this regard. Finally, an assessment on these reforms will be made. It will be highlighted that these reforms suffer from four drawbacks: The equity capital requirements for banks are not sufficient, systemic risk should have been taken more into the focus, shadow banks have been hardly reformed at all and pose a significant risk to the financial system and also the remuneration practices of bank managers require a change. The conclusion of this paper is that despite significant reform efforts the mentioned weaknesses still have to be addressed in order to achieve the goals that have been claimed by politicians and regulators when the reforms began in 2008. Key Words: Financial Crisis, International Regulation, Basel III Accord, Systemic Risk, Macroprudential Policies, Shadow Banks.

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