Categorization of International Investment Bank Regulation Systems

The government and self-regulatory organizations in various countries play different roles and functions in the regulation of investment banks. Investment bank regulation systems can be divided into the following three categories:

1. Government regulation type: Under a government regulation system, the government effects oversight and administration on investment banks by formulating special laws and by setting up national regulatory and administrative organizations. In essence, the government is in a dominant position and plays a leading role in regulation. This type of regulation system is exemplified by the United States and has been adopted by Canada, Japan, Brazil, the Republic of Korea, the Philippines, and China.

2. Self-regulation type: The self-regulation system is the opposite of the government regulation system. Under a self-regulation system, except for some necessary national legislation, the government seldom interferes with the investment banking business. Regulation of investment banks is mainly carried out by industrial self-regulatory organizations such as securities exchanges and investment bank associations. In essence, it attaches importance to and emphasizes the role of self-discipline and self-regulation by investment banks themselves. This type of regulation system is exemplified by the United Kingdom and adopted by most countries and regions in the Commonwealth. 3. Intermediate type: Regulation systems that fall between the government regulation type and the self-regulation type are referred to as the intermediate regulation type. In essence, this type emphasizes both administration through national legislation and self-regulation by the industry itself. This type of regulation system is adopted by German and Italy.

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