Evaluating Regulatory Framework in Financial Sector: Pitfalls and Limitations

The video explores the evaluation of financial regulation, highlighting its pitfalls and limitations. It discusses the inevitable consequences of regulation, using Ben Bernanke's insights. The Goldilocks principle is applied to find the optimal level of regulation, balancing underregulation and overregulation. The video examines the negative impacts of both extremes, such as increased risks and reduced profitability. It also addresses moral hazard and agency capture, emphasizing the need for smarter regulation. The lecture concludes with a summary of key points on financial regulation evaluation.

What are the potential consequences of having a regulatory framework that is ever-changing?

Discuss the implications of agency capture in financial regulation.

How can regulatory bodies ensure they do not fall into the trap of being lenient due to agency capture?