Macro and Micro Level Effects on Responsive Financial Regulation

By Cristie Ford, Faculty of Law, University of British Columbia

The financial crisis makes clear that questions about the appropriate regulatory mix of strategies do not take place in isolation from questions of power and influence, which directly affect feasibility and effectiveness in practice.  It also makes clear that actually operationalizing any regulatory design is bound to meet entirely unexpected challenges.  The purpose of this essay is to consider what the experience of the financial crisis can teach scholars of process-based regulation, and responsive regulation in particular, by widening the lens outward to consider the “macro” forces of power and the “micro” forces within implementation that operate on any regulatory structure.  It argues that process-based and responsive regulation would benefit from building in, at a structural level, greater attention to both the background influence of power, and the mechanisms of incrementalist change that occurs within the interstices of its flexible regulatory process.  The essay closes with a few observations about potential tools available to responsive regulators for addressing the challenges identified.