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A Value-based Approach to Financial Regulation

A paper published by the international alliance of Catholic development agencies, CIDSE, “A Value-Based Approach to Financial Regulation,” offers some perspectives on human rights and financial regulation.

Written from the standpoint of Catholic Social Teaching, the paper identifies several principles from that body of teachings that are relevant to the task of assessing financial regulation from a value-based perspective, among them some that resonate closely with human rights obligations: the need to place human dignity at the centre of economic life, just distribution of wealth, the social function of private property, the Preferential Option for the Poor.

In CIDSE’s view, application of these principles and values to the regulation of the financial sector translates into four simple guidelines that should be used to practically assess any reform proposal. Financial sector regulation should:
1. Place the financial sector at the service of a real economy that is geared to the achievement of human rights, human well-being, the common good and sustainable development
2. Prevent financial crisis to the greatest possible extent, while making them less frequent and severe, with particular attention to sparing their negative impacts to the poorest and vulnerable
3. Promote the just distribution of wealth and income including the alignment of risk and rewards for financial market actors and protection of fair compensation for workers
4. Be the result of transparent and accountable processes that allow for all those affected in society to participate, while respecting subsidiarity

Using these guidelines, the paper assesses the ongoing international agenda of reforms in several areas: Too big to fail , Bank Capital requirements, Derivatives, Hedge funds and private equity funds, Credit rating agencies, Financial sector taxation and “Shadow banking.” The final portion of the paper comprises a list of recommendations based on such assessment.

Download A Value-based Approach to Financial Regulation

 

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