Financial and corporate regulation: A Comparative study of the 21st century global financial crisis

Abstract

The 21st Century has been characterized by globalization. Inevitably, with the advent of globalization came the knitting together of the global financial systems. Thus, the influence and interconnectedness of firms in the financial services sector, and the critical role that financial intermediaries play in modern economies, mean that a malfunction in the financial industry could immediately and profoundly harm the entire world economy. The United States mortgage market default that triggered the 21st Century global financial crisis around the world in 2007 has changed the financial landscape drastically and has impacted on the financial systems in the world, Zambia inclusive. Credit lines for businesses have shrunk, banks and insurance companies have been wound-up, and the world economy has achieved negative growth consequently. Corporate and Financial regulation has come under renewed scrutiny. As a result, policy makers in nations like the United States and Britain have been trying to formulate solutions to the problems that the financial industry and the global economy are facing. They have, in addition to providing extensive support for certain financial firms and markets in periods of high distress, undertaken to refashion a regulatory structure so as to encourage the efficient allocation of capital to productive uses, while protecting the financial system from the defects and excesses that are inherent in financial markets. This entails putting in place, laws and regulations that will in effect stabilize the world economy. The stability of the financial sector is cardinal for the efficient functioning of the economy. It is uncertain whether Zambia has been or will be able to handle the crisis, or even prevent its own crisis, in view of its current financial and corporate regulatory regime.There is need to review the current regulatory regime and investigate areas that need reform, in order to have a regulatory regime that meets international standards. This paper examines the regulatory regime in Zambia and proposes reforms tailored for Zambia based on the lessons from the US, and UK.