The impact of regulation governance on financial system efficiency: The importance of consumer behavior

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This study focuses on the value structure that correlates improvements in the financial services consumer’s decision-making quality with the development of their autonomy. The discussion is based on the concepts of ceremonial and instrumental values, according to Bush (1987). We anchor our analysis on the premise that there is still room for enhancing the results within the National Financial System – NFS – by broadening the scope of initiatives on financial services consumers’ education and protection (von Borowski Dodl, 2020). Strengthening this perspective, we emphasize the consumer’s role as an agent and the relevance of taking decisions according to their life plans. The analysis is undertaken through the institutional literature lens, considering both schools of thought: Original Institutional Economics (OIE) (drawing on Tauheed, 2013a, 2013b) and New Institutional Economics (NIE) (focusing on North, 1990). From the conjunction of the theoretical apparatus and the applied analysis, we propose a governance policy within the NFS aimed at increasing its efficiency. Effective communication between stakeholders and consumers’ participation in the structuring of institutions – by publicly evincing their political power – hold the potential for promoting governance effectiveness. Additionally, although the approach taken focuses on the NFS, the diagnosis process carried out in this study can be easily reproduced in other contexts.

Keywords: Governance, Regulation, Consumer, Institutional Matrix

Authors’ individual contribution: The Author is responsible for all the contributions to the paper according to CRediT (Contributor Roles Taxonomy) standards.

Declaration of conflicting interests: The Author declares that there is no conflict of interest.

Disclaimer: The views expressed in this work are those of the author and do not reflect those of the Central Bank of Brazil or its members.

Acknowledgments: The author is thankful for the important contributions of Sidney Soares Chaves, José Renato Nunes Barros, Gustavo Jorge Laboissière Loyola, Cristiane Alkmin Junqueira Schmidt, Marcelo Luiz Curado and Eduardo Angeli. However, any possible remaining mistakes are the author’s own responsibility. The author also thanks Ricardo Rezende de Pádua for his valuable backing; the Central Bank of Brazil for the financial support provided and the Federal University of Paraná for the opportunity to learn and discuss new ideas.

JEL Classification: G18, G38, H11, O16

Received: 22.12.2020
Accepted: 12.03.2021
Published online: 15.03.2021

How to cite this paper: von Borowski Dodl, A. (2021). The impact of regulation governance on financial system efficiency: The importance of consumer behavior. Risk Governance and Control: Financial Markets & Institutions, 11(1), 80-93.