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The Difference between Western Financial System and The East Asian Financial System Essay Example

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The Difference between Western Financial System and The East Asian Financial System

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The Difference between Western Financial System and The East Asian Financial System. Of course, the activities of all financial institutions of the Western financial system are regulated by the rules of the Basel II – however, the existence of the above legislative framework had not the result expected; because of the above text, potential investors in the Western financial system are more likely to avoid appropriate check of their investment schemes – based on the fact that all relevant activities are based on specific laws; in this way, there would be no need for verification of the investment schemes developed in the context of a Western financial system. The above problem is highlighted by Goodhart who notes that ‘the adoption of the pro-cyclical combination of Basel II and mark to market accounting served to hide the fragility of the over-extended financial and banking positions both from the regulators and from the regulated’

(Goodhart, p. Furthermore, existing regulation of firms that operate in the financial services sector – referring to the Western financial system – is not appropriately developed – in terms of the priorities set by its rules; in this way, the non-compliance with the capital requirements can lead even to the cancellation of a firm’s documentation – referring to the documents that are used for proving the firm’s existence – because of the lack of validity; however, if severe failures are identified in this firm’s strategic decisions – meaning the decisions on investment schemes for the customers’ funds – then the measures taken by the state against the firm can be limited – even non-existent. In the study of Goodhart, it is made clear that the responses of the Western financial system to a financial crisis can be explained by referring also to this system’s macroeconomic structure; the regulation of this system has been also regarded as being responsible for this system’s failure to face the crises of 1997-1998 and 2007-2009. The macroeconomic structure of the Western financial system is characterized by the key role of the executives – the power of these individuals is extended at such level that their decisions can be differentiated from the view of the government or the public on a specific issue referring to their firms’ activities. . The Difference between Western Financial System and The East Asian Financial System.

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Papers under discussion

1. Goodhart, C., Banks and the Public Sector Authorities (Attached). Financial Markets Group. London School of Economics

2. The Quiet Coup By Simon Johnson http://www.theatlantic.com/magazine/archive/2009/05/the-quiet-coup/7364/

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