There has always been a tendency to reshape the regulatory system before pondering into complexities of regulatory controls. But it is quite the opposite; the regulations should be erected to project the purpose and reach of the regulatory authority. There also lies difference in the needed professionalism to cater to Micro/Macro prudential regulations, while the former be carried by FSA, the later should come under the domain of Central Banks. Thus a more collaborative, integrated and consolidated approach world wide, first to stabilize the highly turbulent system form spilling more disaster and then to strengthen it on new foundations.
Present crisis will change the horizon of this institutional realm, taking it towards traditional banking models, and because there has been mergers and take over ‘so greater concentration is very much anticipated on the new emerging financial skyline. This would be a move that can be interpreted as a progression towards simpler models of traditional banking sphere while shedding the more complex paradigm that it structured over a period of time.
Derivative mortgage market would impressively be modified, leading the likes of Mae & Mac to significantly shrink in size and leverage, while the emergence of few giant banking entities would result in a new set of rigid rules and oversight because of the structured risk bearing (Jeremy, 2008). Much like the instances of past, the US financial soil would breed new frameworks that would result the emergence of newer models, sowing a come back of the range of financial variegation much like the diversity that existed before the burst.
But this new breed of crop would be much influenced by regulatory tailoring and the interpretation growing out of it. Much like the restructuring of banking industry, credit derivative instruments would also go through a complete overhaul. This market has already lost its steam with the implementation of greater systematization, increased discreetness and reporting requirements. This goes along with guarantors for credit risk, those who are already bearing the brunt of credit fall are likely to get more exposure due to enhanced risks that the CDS market is getting exposed to.
Another sector that is most likely to be altered is the securitization of financial measures. Regulators ineptitude and lack of will ‘sometime, towards such instruments, actors, vehicles and regulatory stickiness spurred many of today’s obscurity. Thus there would be a move towards striking balance between such instruments and the market stability barrages. Though not prudent to bring about a major shift in policy approaches in the middle of crisis stricken spiral but eventually repositioning would be needed in the way terms are audited, reported, forecasted and studied.
Another shift likely to take place is the role of government in country’s financial system, this role can be designated in terms of influence, control or oversight the ways system’s vehicles work, pave the way for future deliberations and ensued. The consequence of such a repositioning in government’s way of thinking and conducting its responsibilities would be a shift away form reliance on the market mechanism, forces on which all the bets were played in an anticipation that better would come out, in achieving economic policy plans.
Though as the current trend dictates, long term state presence in the financial district would hamper its natural progression thus restraining the much needed monetary evolution that would attain the level of growth US saw in 2000 (Jeremy, 2008). Eventually it is conceived that a combination of a statute of risk based proposition along with a set of rules based on instant reparatory actions would evolve, that would be backed by transaction authentication procedures, customized to United State’s economic, governing and controlling mechanisms.
Over the period of time, massive evolvement in financial market has enabled interlinking various facets of system, allowing an increased centralization of the banking sector, this aspect thus increased the exposure of financial base to fluctuation and alteration of business sequencing and cycles, this complex evolvement of economic structure has lead the policy makers to focus more on macro-economic politic or judiciousness.
There are going to be cross sectional restructuring that would magnify competition, while increasing the level of oversight on critical entities, standardization of regulations concerning credit deliverance across the spectrum, while palliating the level of inter-connectedness. This might also be possible to allow the formation of a centralized supervisory body, having more leverage to look into, scrutinize, regularize and act if deemed necessary to emend the institutional roller coasters.