Shaping the international financial system in century of globalization

Abstract

We educe a perspective on how best to regulate the bank of tomorrow in frames of debate launched by the International Centre for Financial Regulation and Financial Times. Our goal is to create a conceptual framework for policymakers and regulators to shape the international financial system in century of globalization using the 1888 FT's motto: "Without fear and without favour." Our prospect employs an analytical approach, which focuses on the origins and evolution of banking system, its transformation over the recent decades, subsequent encountering the limits to growth and redefinition of new strategic boundaries of emerging financial industry. We identify the main reasons and limitations, which led to the global financial crisis. We propose the new research agendas with the aim to understand the situation in finances, evaluate the created systemic damages, and find the possible ways to resolve the existing problems through introduction of new banking regulation. We think that the global economic and financial systems are highly nonlinear systems. In our opinion, the frequency, phase and amplitude modulation during the mixing of waves, which characterize the Kitchin, Juglar, Kuznets, Kondratiev economic cycles, may result in origination of strong nonlinear dynamics in financial system, accompanied by chaos- induced phenomena. These nonlinear effects have to be taken to the account, when adding the liquidity to the financial system in small quantas in series over time period during the Quantitative Easing policy execution by central banks. We propose the Random Tax to be selectively imposed on the profits, obtained by market agents during high-risk high-profit speculative transactions. We expect that the Random Tax will stabilize the financial system in conditions of free market capitalism.