A paper published by BIS this week supports the – hopefully uncontroversial – view that financial regulation upheld by international standards is vital for economic growth. The working paper studies the effects of prudential regulation, financial development and financial openness on economic growth. Based on an analytical review of the channels through which prudential regulation can affect growth and an empirical analysis of the economies in 64 countries, the paper concludes that growth is promoted by regulation that mitigates financial risks. At the same time, financial openness tends to reduce the growth benefits of regulation, potentially due to the opportunities to associated with regulatory arbitrage: conducting financial business in countries where the rules are less strict, or at least different.
At XBRL International we believe that there is an extraordinary opportunity for collaboration both between regulators and amongst the regulated to improve clarity, improve outcomes and to bring about significant simplification. It’s also a chance to lower the costs associated with inconsistent regulations imposed on business. JP Morgan Chase seems to agree.