Harvard Law School’s Program on International Financial Systems has received a grant to study worldwide capital adequacy regulation of financial institutions. The project, supported by Swiss Reinsurance Co., will involve experts from Harvard and Swiss Re in a cooperative 18-month-long process. The project will present its findings at a conference in late 2002 held at Swiss Re’s Rüschlikon Centre for Global Dialogue located near the company’s headquarters in Zurich, Switzerland.
“Capital adequacy rules have become key tools in the era of convergence in financial intermediation,” said Hal S. Scott, director of the program on International Financial Systems. “This project brings in a very important but generally ignored group of financial firms, the insurance and reinsurance companies that channel many billions of dollars around the world.”
Leading scholars in economics and law will analyze the use of subordinated debt, internal models, and rating agencies. They also will examine the effect on capital of reinsurance, securitization, credit derivatives, and similar instruments. Two major issues to be addressed are the enforcement of capital regulations and how to apply the rules to a conglomerate.
“Our partnership with Harvard Law School is intended to help increase awareness of market realities in this era of rapidly converging financial services,” said Markus Diethelm, chief legal officer of Swiss Re.
The centre for global dialogue in Rüschlikon, which opened its doors in November 2000, is Swiss Re’s platform for risk dialogue with partners and experts worldwide. A key goal of the centre is to facilitate the building of networks, the sharing of knowledge, and the generation of sustainable innovation.
“This project once again reinforces Harvard Law School’s role at the center of international research,” said Harvard Law School Dean Robert C. Clark. “It is socially important that capital adequacy regulation be designed so as to achieve financial stability in the most efficient way.”
The Harvard Law School Program on International Financial Systems was founded in 1986. It was established to conduct research linking law, economics, and finance. In the past 15 years it has published books, held symposia, and provided technical assistance to a variety of countries.