The Regulatory Compass: Towards a purpose-driven approach to financial regulation

We are living through a period of major political and economic uncertainty. While Brexit and new global forces reshape our economy, the rise of digital technologies could set our financial system on the path to greater fairness, responsibility and democracy – or the reverse.
It would be tempting at this point to focus on preserving our current financial system, often seen as the ‘goose that lays the golden eggs’ in our economy. Yet this system is arguably no more resilient than before the financial crisis, and – more importantly – it is not adequately serving its end users, channelling sufficient capital to the productive economy, or helping us address the biggest social and environmental issues of our time. Do we cling on to the status quo, with all its shortcomings? Or do we seize the opportunity to return to first principles, and reorient regulation more explicitly around the social purpose of finance?
In this report, we argue that the present moment offers an opportunity to step back and ask ourselves what outcomes we are regulating the financial system for, and what kind of financial system – as well as what kind of regulatory system – can best achieve those outcomes.

The Finance Innovation Lab

July 3, 2018

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