Optimal Deceptive and Reference Policies for Supervisory Control

The use of deceptive strategies is important for an agent that attempts not to reveal his intentions in an adversarial environment. We consider a setting in which a supervisor provides a reference policy and expects an agent to follow the reference policy and perform a task. The agent may instead follow a different, deceptive policy to achieve a different task. We model the environment and the behavior of the agent with a Markov decision process, represent the tasks of the agent and the supervisor with linear temporal logic formulae, and study the synthesis of optimal deceptive policies for such agents. We also study the synthesis of optimal reference policies that prevents deceptive strategies of the agent and achieves the supervisor's task with high probability. We show that the synthesis of deceptive policies has a convex optimization problem formulation, while the synthesis of reference policies requires solving a nonconvex optimization problem.Comment: 20 page

Consumer protection and financial literacy : lessons from nine country studies

The recent turmoil in financial markets worldwide has emphasized the need for adequate consumer protection and financial literacy for long-term stability of the financial sector. This Working Paper aims to summarize key lessons from reviews of consumer protection and financial literacy in nine middle-income countries of Europe and Central Asia (Azerbaijan, Bulgaria, Croatia, the Czech Republic, Latvia, Lithuania, Romania, the Russian Federationand Slovakia). All the country assessments used a systematic common approach, based on a set of Good Practices for Consumer Protection and Financial Literacy developed by the World Bank's Europe and Central Asia Region. The objective of the Working Paper is to contribute to the international dialog on strengthening financial consumer protection and financial literacy in emerging markets.A financial consumer protection regime should meet three objectives. First, consumers should receive accurate, simple, comparable information of a financial service or product, before and after buying it. Second, consumers should have access to expedient, inexpensive and efficient mechanisms for dispute resolution with financial institutions. Third, consumers should be able to receive financial education when and how they want it. A common challenge among the nine countries is the need of an adequate institutional structure for financial consumer protection. However independent of the specific institutional structures, financial consumers should have one single agency where to submit complaints and inquiries. Financial institutions should be required to apply fair, non-coercive and reasonable practices when selling and advertising financial products and services to consumers. Personal data should also be carefully protected.Financial Literacy,Access to Finance,Emerging Markets,Debt Markets,Bankruptcy and Resolution of Financial Distress

Reputation and the non-prime mortgage market

St. Louis Association of Real Estate Professionals, St. Louis, July 20, 2007Mortgages

Adaptive Financial Regulation and RegTech: A Concept Article on Realistic Protection for Victims of Bank Failures

Frustrated by the seeming inability of regulators and prosecutors to hold bank executives to account for losses inflicted by their companies before, during, and since the financial crisis of 2008, some scholars have suggested that private-attorney-general suits such as class action and shareholder derivative suits might achieve better results. While a few isolated suits might be successful in cases where there is provable fraud, such remedies are no general panacea for preventing large-scale bank-inflicted losses. Large losses are nearly always the result of unforeseeable or suddenly changing economic conditions, poor business judgment, or inadequate regulatory supervision—usually a combination of all three. Yet regulators face an increasingly complex task in supervising modern financial institutions. This Article explains how the challenge has become so difficult. It argues for preserving regulatory discretion rather than reducing it through formal congressional direction. The Article also asserts that regulators have to develop their own sophisticated methods of automated supervision. Although also not a panacea, the development of “RegTech” solutions will help clear away volumes of work that understaffed and underfunded regulators cannot keep up with. RegTech will not eliminate policy considerations, nor will it render regulatory decisions noncontroversial. Nevertheless, a sophisticated deployment of RegTech should help focus regulatory discretion and public-policy debate on the elements of regulation where choices really matter

Consumer protection in the Kenyan financial sector: A case for a Twin Peaks model of financial regulation

Magister Legum - LLMThe dynamic character of the financial services industry necessitates frequent appraisal of the regulation of the sector. The main objectives for regulation of the financial sector include financial stability, promotion of competition and protection of the consumers. In ensuring consumer protection, there is need to balance this with all the other objectives to ensure optimal protection in the entire financial sector. This can be difficult as it is mostly dependent on the regulatory framework in the financial sector for the basic reason that most of the failures are associated with regulation. Key to the challenges is that consumer protection is served by measures that ensure proper conduct on the part of the service providers. Interests of the providers of the financial services may thus not be sufficiently aligned with those of the consumers of the products. There are three common models of financial regulation. They are the sectoral model, unified or integrated model and the Twin Peaks model. The financial sector in Kenya follows a sectoral model. It is a hodgepodge of institutional and functional regulation. There are five (5) government agencies that regulate specific segments of the financial sector with each of the regulators being established to operate independently within the permits of an Act of Parliament. This is without mentioning the many other segments that have no specific regulators

Public credit registries as a tool for bank regulation and supervision

This paper is about the importance of the information in Public Credit Registries (PCRs) for supporting and improving banking sector regulation and supervision, particularly in the light of the new approach embodied in Basel III. Against the backdrop of the financial crisis and the existence of information data gaps, the importance of complete, accurate and timely credit information in the financial system is evident. Both in normal times and during crises, authorities need a device that allows them to look at the universe of credits in a detailed and readily way. And more importantly, they need to develop tools that exploit as much as possible the information therein contained. PCR databases contain individual credit information on borrowers and their credits which makes it possible to implement advanced techniques that measure banks'credit risk exposure. It allows optimizing the prudential regulation ensuring that provisioning and capital requirements are properly calibrated to cover expected and unexpected losses respectively. It also permits validating banks'internal rating systems, performing stress tests and informing macroprudential surveillance. In this respect, it is envisioned that the existence of a PCR will be a key factor to enhance the supervision and regulation of the financial system. Furthermore, the extent, accuracy and availability of the information collected by the authorities will determine the usefulness of the PCR as part of their toolkit to monitor the potential vulnerabilities not only on a microprudential level, but also on a macroprudential one.Banks&Banking Reform,Access to Finance,Financial Intermediation,Debt Markets,Bankruptcy and Resolution of Financial Distress

Potential Jurors’ Perceptions of Polygraphs in Court

The polygraph occupies a contentious place in the justice system. The instrument detects various physical responses and records these results, and the examiner interprets the readings and makes a determination on whether the test subject was truthful or deceptive. Polygraphs are, in some jurisdictions, a part of the court process and in others are forbidden. On the whole, there is less research on the polygraph and their permissibility in the legal process compared to other types of evidence. There is even less research on the opinions of jurors, especially compared to surveys of criminal justice professionals. That which is present is inconsistent. This thesis was intended to measure the opinions of a pool of potential jurors on the relative weight and veracity they assign to the polygraph. With the noted inconsistency, this research was primarily exploratory and replicative in nature. To obtain data, a 17-question online survey was administered to students in nine selected courses. Professors in these courses either forwarded the survey link to their students via email or posted the link on Blackboard. It was emphasized that the survey was strictly voluntary. There were three hypotheses: respondents would have only moderate faith in the polygraph, criminal justice students would have harsher views than those not in such courses, and that those selected to receive the extra literature summary would have harsher views than those who did not. Results of the study only substantiated the first hypothesis. Chi-square analysis showed an almost complete lack of significance in theorized relationships. Receipt of the additional literature summary only affected the respondents’ general opinions of polygraph evidence and was insignificant for every other dependent variable

Insider trading: a study from US origins to a comparison with the European discipline

openThe following thesis aims to analyse the issue of misuse of insider information that could give rise to contrasting phenomenon of insider trading. Subsequently, it is intended to develop a comparative study of the different legislations between the two largest areas of interest: the United States and the European Union. This analysis will be carried out from both a legal and an economic point of view by pursuing these two areas of study in parallel.The following thesis aims to analyse the issue of misuse of insider information that could give rise to contrasting phenomenon of insider trading. Subsequently, it is intended to develop a comparative study of the different legislations between the two largest areas of interest: the United States and the European Union. This analysis will be carried out from both a legal and an economic point of view by pursuing these two areas of study in parallel

The World Trade Organization and financial stability: the balance between liberalisation and regulation in the GATs

The WTO General Agreement on Trade in Services and its Annex on Financial Services provide the international legal framework for the regulation of cross-border trade in financial services. This paper analyses some of the main provisions of the GATS and the Annex on Financial Services to determine its impact on domestic financial regulation and whether the GATS framework can achieve its objectives of liberalising international trade in financial services while allowing states to maintain adequate domestic regulatory institutions. The paper argues that the GATS provides a flexible framework for states to negotiate liberalisation commitments while allowing sufficient domestic regulatory authority to achieve financial stability objectives. The extent to which states can depart from their GATS obligations to achieve regulatory objectives has become the source of academic debate and policy interest. Although the WTO has played little or no role in the financial regulation debate, the GATS contains certain disciplines that could potentially have significant implications for limiting regulatory discretion over financial markets. The paper suggests that the Doha Development Agenda should address some of these issues as they relate to the regulation of cross-border trade in financial services. The role of the WTO in this area raises important issues regarding the institutional design of financial regulation and related issues of global financial governance