1. |Date 09.09.2010 faculty of law law and economics 1 Rondetafelbijeenkomst NILG Paper Financiele Markten Discussant: Oscar Couwenberg

2. |Date 09.09.2010 faculty of law law and economics 2 Two major points ›Rife with agency problems ›Ubiquitousness of information problems ›Agency theory: ›Goal incongruence between two players, opportunistic tendencies and information asymmetry leads to suboptimal decisions ›Main governance instruments are incentives, monitoring systems and bonding

3. |Date 09.09.2010 faculty of law law and economics 3 Agency problems in financial sector ›Client – broker/investment advisor ›Employee – Boss ›Client – Financial institution ›Financial institution - Supervisor ›Board – Shareholders ›Supervisor – Public/Politics

4. |Date 09.09.2010 faculty of law law and economics 4 Information problems: advisor institution supervisor client general public Insider outsider Financial expertise Lack of that

5. |Date 09.09.2010 faculty of law law and economics 5 Toxic mix ›Adverse incentives on all levels, in all firms and in all relationships ›Supervisors may mitigate some of them, financial transparancy helps but does not solve it either ›Consumer protection leads to moral hazard and adverse selection, i.e. yields wrong incentives on the side of the consumer ›Contractual spill over: it is not one single contract that generates specific, generic and systemic problems, but the interplay of these contracts together