Social Responsibility in Financial Regulation Responsabilité sociale en matière de réglementation financière Knowledge Mobilization and the Impact of Research in a Liberal Arts Institution James Addis

Introduction: la finance et la société Suite de la crise de 2007-2008: la finance est-elle au service de la société? Ce n’est pas clair qu’elle promeut la prospérité pour tous Recherches conjointes avec Prof. Ian Roberge Rôle des régulateurs dans la promotion d’un secteur financier socialement responsable À quoi se ressemblerait un régulateur financier socialement responsable? Le cas canadien: comme d’habitude, ou le début de la responsabilité sociale?

Why does finance matter? Underpins economic growth (see Stiglitz et al. 2009): Investment activity takes place via the financial sector Facilitates efficient allocation of resources Distribution of risk However, finance’s impact is not wholly positive As seen in the 2007-2008 crisis Improperly regulated finance can drive recessions (see for example Minsky 1992) Economists agree that a well-functioning financial services sector fosters economic growth by increasing the efficiency of the economy via improved risk management and capital allocation (Stiglitz et al. 2009b).

Objectifs de la réglementation financière Donc, la réglementation financière est nécessaire! La réglementation: un élément constitutif du marché (Vogel 2014) Deux objectifs principaux de la réglementation financière aujourd’hui: Efficacité et stabilité systémique Protection des consommateurs Consumer protection protects users of financial services and ensures that they are treated fairly in the financial marketplace by helping them to make informed decisions and preventing inappropriate firm-consumer interactions such as fraud.

Role of objectives and mandates Mandate: defines the regulator’s responsibilities, aims and scope of action Objectives and mandates determine regulatory practices And thus economic and social outcomes See diagram

Social responsibility in detail Social responsibility implies changes to objectives and mandates Promote the wellbeing of citizens (in the short run and long run) Encourage growth in the real economy As compared to speculation, other ‘socially useless’ financial activity There is “an under-appreciation by academia of how, without proper rules, finance can easily degenerate into a rent-seeking activity” (Zingales 2015, 1)

Le cas canadien Étude de cas qualitative de trois régulateurs canadiens: OSFI: Office of the Superintendent of Financial Institutions – banques CMHC: Canadian Mortgage and Housing Corporation – financement du logement CSA: Canadian Securities Administrators – valeurs mobilières Éléments que nous avons considéré: Discours publique Pratiques réglementaires Très peu de mouvement vers la responsabilité sociale par les régulateurs Considération d’une nouvelle approche, mais peu de pas vers le véritable changement

Knowledge Mobilization Our focus: how do financial regulators do their work? How could they do it better? Direct implications for policymakers Engagement with the nuts and bolts of real-world policymaking Such research requires interdisciplinary expertise Political science, public policy, public administration, economics, business and finance Greatly facilitated by working at a liberal arts college Cross-disciplinary interaction between researchers in social science subject areas

References Minsky, Hyman P. 1992. ‘The Financial Instability Hypothesis’. Economics Working Paper Archive. Levy Economics Institute. https://econpapers.repec.org/paper/levwrkpap/wp_5f74.htm. Stiglitz, Joseph E., Amartya Sen, and Jean-Paul Fitoussi. 2009. ‘The Measurement of Economic  Performance and Social Progress  Revisited’. OFCE. https://www.ofce.sciences-po.fr/pdf/dtravail/WP2009-33.pdf. Vogel, Steven. 2010. ‘A Socio-Economic Perspective on the Financial Crisis’. Socio-Economic Review 8 (3): 553–57. https://doi.org/10.1093/ser/mwq009. Zingales, Luigi. 2015. ‘Does Finance Benefit Society?’ Working Paper 20894. National Bureau of Economic Research. https://doi.org/10.3386/w20894.

Thank you! Merci!