case study on financial regulation

Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications

John Coates is the John F. Cogan, Jr. Professor of Law and Economics at Harvard Law School.

The 2010 Dodd-Frank Act mandated over 200 new rules, bringing renewed attention to the use of cost-benefit analysis (CBA) in financial regulation. CBA proponents and industry advocates have criticized the independent financial regulatory agencies for failing to base the new rules on CBA, and many have sought to mandate judicial review of quantified CBA (examples of “white papers” advocating CBA of financial regulation can be found here and here ). An increasing number of judicial challenges to financial regulations have been brought in the D.C. Circuit under existing law, many successful, and bills have been introduced in Congress to mandate CBA of financial regulation .

In this paper,  Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications , I develop detailed case studies that collectively show that precise, reliable, quantified CBA is simply not feasible in a representative sample of six significant financial regulations. Instead, efforts to quantify CBA routinely require multiple, subjective, contestable judgments, producing what can only be called “guesstimates”—extremely wide ranges of equally defensible net costs and benefits—so wide that the effort cannot meaningfully “guide” assessments of the rules. Because finance is central to the economy, because it is social and political, and because it is non-stationary, regulation of finance and financial markets is different in kind from many other kinds of regulation, which focus on activities that can be more reliably studied. As a result, judicial review of quantified CBA in the financial context is more likely to camouflage discretionary choices than to discipline agencies or promote democracy.

The paper first clarifies the meaning of CBA. CBA is often used to mean policy analysis, but also to mean types of laws mandating the use of CBA or providing for judicial review of CBA or its inputs. CBA is also sometimes used to describe a general conceptual framework for evaluating regulations, roughly amounting to applied welfare economics, which is a sensible framework for general policy analysis, but it is also sometimes expected to produce specific quantified estimates of the effects of a rule—“quantified CBA.” Finally, CBA is often viewed as a clearly good thing as a policy matter—enhancing transparency and democracy, and disciplining regulators—but the history of CBA suggests that it can also produce a darker mix of effects, including rent-seeking, increases in regulatory discretion, and reductions in transparency. The paper then reviews current law of CBA relevant to financial agencies, and critiques the recent spate of D.C. Circuit decisions striking down regulations on the supposed ground of inadequate CBA.

The core of the paper is a close examination of what efforts to quantify CBA might produce, or in two cases what such efforts did produce, as applied to six representative and major financial regulations:

• 1. The SEC’s disclosure rules under Sarbanes-Oxley Section 404,
• 2. The SEC’s aborted mutual fund governance reforms,
• 3. Basel III’s heightened capital and liquidity requirements for banks,
• 4. The Volcker rule,
• 5. The SEC’s cross-border swap proposals, and
• 6. The FSA’s mortgage market reforms.

In the case studies, the paper attempts to advance the substantive project of quantitative CBA of financial regulation itself, by specifying in more detail than prior research how CBA could be applied in specific contexts, and by more carefully describing, clarifying, and specifying sources of sensitivity of the results of quantified CBA in each study. The primary general conclusion of the case studies is that CBA of such rules cannot be reliably and precisely quantified with current research methods.

Rather, CBA for major financial regulations entails (a) causal inferences that are unreliable under standard regulatory conditions; (b) using problematic data, and/or (c) the same contestable, assumption-sensitive macroeconomic and/or political modeling used to make monetary policy, which even CBA advocates would exempt from CBA law. While CBA is a useful conceptual framework for financial regulation, and quantified CBA is a worthy long-term research goal, CBA is not capable of disciplining regulatory analysis in its current state. Instead, CBA should be conducted only to the extent the relevant financial agencies choose to do so. For the near future, at least, decisions of when and how to conduct CBA in the financial regulation inevitably remain in the realm of judgment—and subject to ordinary political discipline. Neither Congress nor the Courts can force such decisions into the realm of science, and attempts to do so will be more political than legal, and do more to obscure than enlighten the public about the judgments financial regulation requires.

The full paper is available for download here .

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Impact of financial regulations: insights from an online repository of studies

Impact of financial regulations: insights from an online repository of studies (01:45)

the BIS launches a public, online and interactive repository of studies on the effects of financial regulations, called FRAME.

Stijn Claessens

The BIS is launching a public, online and interactive repository of studies on the effects of financial regulations, called FRAME . The purpose of this repository is to keep track of, organise, standardise and disseminate the latest findings. FRAME currently covers 83 studies and 139 quantitative impact estimates from 15 countries or groups of countries, offering a new and comprehensive perspective on what the literature has been able to document to date, and where gaps exist. We observe a high degree of heterogeneity across impact estimates, notably in terms of the effects of capital regulation on loan growth: while on average the estimated effect is that more capital leads to more lending, there are large differences across studies. A meta- analysis shows that an important driver of these differences is whether the underlying study incorporates second-round effects. 1

JEL classification: E44, G21, G28 .

Now that the main elements of the post-crisis banking regulations have been implemented (BIS (2018)), an evaluation of these regulations' impact comes within closer reach. And the G20 Leaders' request to the Financial Stability Board to evaluate the effects of financial reforms (FSB (2017)) has placed such analysis high on the international agenda. In recent years, the number of studies that assess regulatory impacts has grown, allowing judgments to be based on a larger sample of studies. The wide range of findings, however, calls for a systematic approach to understanding their drivers. The work presented here is an element of the response.

This special feature is structured as follows. First, we present the main features of a public repository of studies on the effects of bank regulations, called FRAME (Financial Regulation Assessment: Meta Exercise). This repository, maintained by the BIS, is not intended to be another literature stocktake, but to serve as a novel tool that tracks, organises, standardises and disseminates findings from many studies. It can be updated with new findings on a continuous basis, with the possibility for researchers to report their own studies online. Second, we present selected insights from FRAME on the effects of bank capital and liquidity, and relevant regulations - the area where most analysis has been conducted - on banks' funding costs, the pass-through of funding costs to lending rates, bank lending growth and the probability of a crisis. We show that there is a wide distribution of these estimated effects, especially on bank lending. Third, we try to explain this heterogeneity using meta-analysis techniques. We document that one important driver of the heterogeneity is whether or not the analysis accounts for general equilibrium - that is, second-round - effects.

Key takeaways

• FRAME is an online interactive repository of regulatory impact estimates. Its purpose is to keep track of, organise, standardise and disseminate the latest findings. The FRAME repository is also meant as a sharing platform, through which users can report their own studies.
• The repository is structured according to selected bank balance sheet measures and their effects on more than 10 variables. The ratios currently being considered relate to those Basel Committee on Banking Supervision (BCBS) capital and liquidity standards which are balance sheet-based. FRAME currently covers 83 studies and 139 quantitative impact estimates from 15 countries and regions. It classifies each of these along 18 dimensions, ranging from the specific countries analysed and the size of the banks studied, to the specific sample period.
• A comparison of the effects of the various regulatory ratios in normal and crisis times suggests that the Net Stable Funding Ratio has a much stronger countercyclical effect on bank lending than bank capital or liquidity.
• We document significant heterogeneity across quantitative impact estimates, notably regarding the effects of capital (regulation) on loan growth. On average, the effect is found to be positive, but there are large differences, in part due to whether the underlying study incorporates general - or only partial - equilibrium effects.

The FRAME repository in a nutshell

FRAME ( https://stats.bis.org/frame ) is an online repository of studies on the effects of financial regulations. It tracks, organises, standardises and disseminates the growing number of quantitative impact studies on the effects of financial regulations. It includes studies from academia, policy institutions and the private sector, covering the period 1991 to the present.

FRAME essentially spans and updates existing surveys (eg BCBS (2016, 2019), Dagher et al (2016)). One important novelty of FRAME is that it goes beyond collecting point estimates by adding relevant characteristics of the underlying studies. The repository is structured according to selected bank balance sheet ratios related to key regulatory standards and their effects on selected outcome variables. The regulatory ratios currently included relate to the Basel III capital and liquidity standards. As a convention, the repository refers to the outcome variables as "targets" ( Graph 1 and box ).

FRAME contains information for 12 different targets, ranging from banks' cost of funding to overall GDP growth, and covers 83 studies and 139 quantitative impact estimates for 15 countries or groups of countries ( Graph 2 , left-hand panel). It is intended to be representative of the overall state of knowledge. About 60% of the estimates refer to analysis covering banks and other financial intermediaries in the United States, reflecting the greater weight in the academic literature of studies that use US data. The largest number of results are on the effects of bank capital and bank capital regulation on banks' supply of loans, funding costs, lending rates and the probability of a crisis; and on the effect of liquidity ratios and liquidity standards on bank lending ( Graph 3 ). To facilitate comparisons, estimates are all standardised. To allow for verification and full transparency, the repository contains the original estimates, and the methodologies applied to standardise them are described in detail.

FRAME will be updated with new estimates as analyses are completed. Indeed, the repository is meant as a sharing platform through which users can report their own findings. 2 To avoid potential selection bias, any study can be referenced in FRAME. The only prerequisite is, of course, that the study be public and accompanied with a disclosure statement as to whether it was sponsored (eg by the financial sector) or conducted independently (eg by academics). Users can filter studies based on this and other characteristics (see box ). About half of the studies currently in FRAME were published in academic journals, and one fifth in journals uniformly rated as top ones. The quality of the estimates is expected to further improve over time, eg as researchers get access to more precise data and longer time series.

Further reading

• An assessment of the long-term economic impact of stronger capital and liquidity requirements
• Assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements
• Literature review on integration of regulatory capital and liquidity instruments

Interpreting the estimates

The estimates reported in FRAME must be interpreted with an eye towards the type of effect they are meant to capture. Two distinctions in particular matter.

One crucial distinction is whether the estimates refer to the effects of an increase (or decrease) in an observed regulatory ratio (eg the Basel III Common Equity Tier 1 (CET1) ratio) or the effects of a change in a minimum regulatory ratio (eg the Basel III 4.5% minimum CET1 ratio). This distinction is important, because changing a minimum regulatory ratio does not necessarily make banks change their actual regulatory ratio - ie their capital ratio measured according to the regulatory standards - to the same degree (or even at all). Vice versa, banks may change their actual regulatory ratios even when the regulatory minimum does not change. As the observed ratios can vary due to many factors, estimates based on them are noisier indicators of what regulatory changes may imply than estimates based on regulatory minima. Unfortunately, few studies exist on the latter.

The gap is very large. Mainly owing to the lack of hindsight and detailed supervisory data, only 15% of the estimates in FRAME (and more generally in the literature) capture the effects of higher minimum regulatory standards stricto sensu ( Graph 2 , right-hand panel). 3 The remaining 85% are based on observed regulatory ratios, if not on proxies thereof. When the regulatory ratio is not observable (eg owing to banks not reporting it), studies typically use proxies, whose quality may vary, not least with the measure considered. Studies of Basel III's Liquidity Coverage Ratio (LCR) or Net Stable Funding Ratio (NSFR), for example, have so far been conducted using relatively coarse approximations, such as the ratio of liquid assets or deposits to total assets: banks have started to disclose their Basel III LCR or NSFR in their financial statements only recently. In contrast, studies of capital requirements can usually rely on a relatively long time series of individual banks' regulatory capital ratios, which banks have been forced to disclose.

The FRAME repository addresses this problem head-on. It gathers all types of estimates, but makes an explicit distinction between observed and minimum regulatory ratios, as well as - whenever applicable - between the various proxies used for the regulatory ratios themselves (see box ).

Another important distinction is between transition and permanent effects, ie the impact during the transition towards a tighter standard versus the final effects of that standard. 4 The transition effect is about the behaviour of banks (or the economy) as they adjust to a new regulation; it depends on how they adjust, and how fast. 5 The permanent (long-term) effect, in contrast, is about how banks (or the economy) behave under the new regulation once they have fully transited to it, compared to how they would have behaved had the regulation not changed. The latter situation not being observable, estimations of the long-term impact most often rely on counterfactual analyses. 6 With banks facing adjustment costs to raise their capital, one can expect a regulatory tightening to have a larger impact during the transition than once banks have fully adjusted. In the case of capital regulation, estimates in FRAME include both those referring to the transitional effects of banks increasing their capital ratio by 1 percentage point and the effects of the capital ratio being 1 percentage point higher over the long term, whatever the transition dynamics.

FRAME users can also break down the distributions of impact estimates along 16 other dimensions.

For example, a user can ask whether the estimates hold for crisis or normal times ( Graph 2 , right-hand panel). About 30% of the estimates in FRAME approximate the benefits if banks enter a crisis with more capital, more liquid assets or more stable funding; the other 70% study such effects in normal times.

Another example is the breakdown between partial and general equilibrium effects ( Graph 2 , right-hand panel). By affecting many banks simultaneously, a change in the regulatory standards is likely to impact overall quantities (eg lending volume) and prices (eg deposit rate, return on equity, asset prices). These effects can have further repercussions that reinforce, dampen or reverse the initial - first-round - effects of the regulatory change. For example, higher capital requirements may make lending more costly and less easily available - which in turn may lower asset prices (eg house prices), making collateral less valuable and inducing even less lending. About 30% of the estimates in FRAME capture such indirect - yet potentially relevant - effects.

Further breakdowns include classifications by country, type of regulatory ratio (eg risk-weighted or not), methodology, whether the study has been peer-reviewed and other aspects (see box ).

• Framework for Post-Implementation Evaluation of the Effects of the G20 Financial Regulatory Reforms
• Banks and capital requirements: channels of adjustment
• Macroeconomics of bank capital and liquidity regulations

Selected insights from FRAME

FRAME can be used to spotlight what the literature has, and has not, been able to document to date. Looking across the included studies, there is no indication that raising bank liquidity or stable funding ratios reduces bank lending ( Graph 4 , left-hand panel, red and yellow bars). Recent studies also find that if a bank has a higher capital ratio this tends to be accompanied by a higher liquidity ratio (beige bar). To the extent that holding more liquid assets is associated with more prudent behaviour, this finding is in line with the notion that banks tend to take less risk when they have more "skin in the game". Studies also confirm that the effects during the transition to tighter regulation may be different from the impact once banks have reached the new standard. For example, a 1 percentage point higher capital ratio is found to have a positive effect on loan growth in the long term, but a negative effect during the transition (compare the red bars in the left- and right-hand panels of Graph 4 ). 7 Some of these findings should be treated as preliminary, however, since there have not always been enough studies to draw robust conclusions.

The FRAME repository: options and lexicon

FRAME ( https://stats.bis.org/frame ) enables users to plot the distributions of the estimated effects of a given regulation on a number of variables. This box briefly presents the main options available and terms used ( Graph A ).

1. Regulatory ratio : refers to the bank's balance sheet ratio subject to the regulation (eg capital ratio, LCR, NSFR). While ideally the estimates are based on the changes in the minimum regulatory requirements and individual banks' exposure to those changes, there are, in practice, too few regulatory changes and too little detailed supervisory information to allow for a precise analysis. In FRAME, 85% of the estimates are currently based on changes in the observed ratios, rather than on changes in the minimum regulatory requirement. This proportion is expected to diminish as supervisory data and longer time series become available.

3. Target : the variable on which the regulation has the impact. Importantly, this term does not refer to any objective of the regulation considered.

4. Level and growth rate : whether the target is a level or a growth rate, ie whether estimates capture the effects on the growth rate of economic aggregates (eg bank lending, investment, GDP) or their level, with the effects accordingly reported as a percentage point variation in growth rate, or as a percentage variation of the level.

5. Breakdown options : the multiple splits of the estimates in FRAME. These include:

• Actual or minimum regulatory ratio : whether the estimated effect is that of a change in the observed ratio, or of a change in the minimum regulatory ratio, with the latter typically derived either from calibrated or estimated macro models, or from micro data on individual banks' exposure to the change in regulation (eg Pillar 2 information, Basel III liquidity ratios).
• Regulatory ratio - detail: definition of the regulatory ratio, or proxy for it, used in the study.
• Regime : whether the estimated effect holds in crisis or normal times.
• Equilibrium type : whether the estimated effect accounts for general equilibrium (second-round) effects. In most cases, microempirical studies are classified as "partial equilibrium". Macroempirical studies and estimates from general equilibrium macro models are classified as "general equilibrium".
• Peer review : whether the study has been peer-reviewed, ie published in an academic journal.
• Mean of the regulatory ratio : refers to the mean of the regulatory ratio over the sample used for the estimation, allowing one to assess how the marginal effect of a change of a regulatory standard varies with its tightness.

Methodology : the methodology used in the study, eg estimation, macro model, theory.

6. Disclosure statement: whether the authors of the study had relevant or material financial interests that relate to their analysis (eg research sponsored or commissioned by lobbying groups).

Despite recent progress, the literature remains largely focused on the long-term impact of capital regulation on banks' lending activities. As an illustration, we present three insights.

First, higher bank capital raises the overall funding cost - debt plus equity - only marginally. A 1 percentage point higher bank capital ratio is associated with a less than 20 basis point higher average cost of funding (weighted average cost of capital (WACC)), which takes account of an imputed equity funding cost ( Graph 5 , left-hand panel, blue bars). 8 Tighter capital regulation may raise the weight of equity funding in the WACC. But this is almost offset by the lower unit cost of both debt (green bars) and equity funding (red bars). This result should be set against the benchmark in the Modigliani-Miller theorem, which holds that, under ideal conditions, changes in a firm's WACC should not be affected at all by its mix of debt and equity funding. 9 The fact that the WACC increases, but only marginally, suggests that the logic underlying the Modigliani-Miller theorem applies to the impact of changes in bank capital, but does not operate to the full extent.

A second insight, provided by a number of papers, is that banks with a higher capital ratio charge a higher loan rate ( Graph 5 , criss-crossed area). Surprisingly, the loan rate is much higher than what a one-to-one pass-through from the WACC would generate (blue bars). This finding points to a potential inconsistency between the two strands of the literature, which deserves more careful scrutiny. 10 A key piece of the puzzle is the impact of higher capital on the cost of non-equity financing, which ought to be unambiguously negative.

A third insight relates to the effects of banking regulation on bank lending growth. One objective (among others) of the post-crisis regulatory reforms was to foster banking system resilience in times of stress (BCBS (2011)), while preventing future crises by deterring excessive credit growth - a strong predictor of banking crises (eg Aldasoro et al (2018)). Accordingly, following regulatory tightening, one would expect banks to be less inclined to boost lending in good times or to cut lending in bad times. To see if banking regulations indeed have this potential to smooth the credit cycle, we report in Graph 6 the effects of higher capital, liquidity and stable (ie core) funding ratios on lending growth, comparing crisis (red bars) and normal (blue bars) times. Only the stable funding ratio (right-hand panel) seems to have a clearly countercyclical impact: banks with more stable funding lend relatively more than other banks during crisis times, ie they are more resilient. They also do not increase loan growth as much in normal times. In contrast, the capital and liquidity ratios appear to have much weaker countercyclical effects.

Heterogeneity of estimates

What explains the heterogeneity of estimates? To understand better why some estimates vary so widely, we use meta-analysis techniques, which are particularly well suited when studies are not directly comparable but evaluate the same - or closely related - questions. 11

Averages can mask a fair amount of heterogeneity. On average, banks with a 1 percentage point higher capital ratio (eg 13% versus 12%) have a 0.41 percentage point higher growth rate of loans, while a 1 percentage point increase in a bank's stable funding ratio increases loan growth by 0.15 percentage points ( Table 1 ). But these estimates vary widely across studies ( Graph 7 ). For the effect of bank capitalisation on loan growth, estimates range from -3.89 percentage points to 3.82 percentage points (left-hand panel, red dots). This range is large by the usual statistical standards (the I 2 statistic is above 75%; see footnote 11 ), highlighting the lack of consensus in the literature. In the case of the impact of bank liquidity on loan growth, the studies do not even agree as to the sign of the average effect, which is not statistically significant. However, the literature does agree that a higher bank capital ratio reduces the probability of a crisis. On average, a 1 percentage point higher ratio is associated with a 1 percentage point lower crisis probability, with a very low dispersion in the estimates. 12

We next use meta-regressions to test whether specific characteristics of the studies can explain the observed heterogeneity. Given the limited number of observations, we have to restrict our analysis to the effects of bank capital on loan growth, and consider only four potential factors: whether the capital ratio is risk-weighted or not; whether the analysis underlying the estimate controls for loan demand; 13 whether the analysis accounts for general equilibrium feedback effects; 14 and whether the impact is estimated during a crisis.

The results are shown in Table 2 . The "baseline" meta-regression (column 1) yields the average estimate, absent using any control for these four characteristics. By construction, it is the same as the average estimate reported in Table 1 (0.41 percentage points).

The comparison suggests that general equilibrium considerations are an important driver of heterogeneity. While partial equilibrium analyses find a statistically significant and positive average impact of a 1 percentage point higher capital ratio on loan growth (0.29 percentage points), the impact is estimated to be 2.13 percentage points stronger when macroeconomic feedback (second-round) effects are taken into consideration ( Table 2 , column 4). 15 Controlling for those effects reduces the residual heterogeneity across the studies by 1.86 percentage points (compare the I 2 statistic in columns 1 and 4). And, while the reduction in heterogeneity is small, it is statistically significant.

None of the other potential drivers seems nearly as relevant. For example, the risk-weighted capital ratio is found to have only a 0.48 percentage point lower impact on loan growth than the leverage ratio ( Table 2 , column 2), and this difference is not statistically significant. The average estimated impact is also essentially the same, whether or not the study controls for loan demand (column 3) or crisis times (column 5).

FRAME is an online interactive repository of regulatory impact estimates. Its purpose is to track, organise, standardise and disseminate the latest studies on the impact of financial regulation on banks, the financial system and the macroeconomy. Its broad content offers a new and comprehensive perspective on what researchers have been able to document to date, and where gaps exist.

Comparing, inter alia, the effects of regulatory ratios in normal and crisis times, we find that the stable funding ratio has a much stronger countercyclical effect on bank lending than bank capital or liquidity ratios. But the number of studies remains relatively small. We will have much more to learn about these effects as the regulatory reforms are implemented and more analysis is done.

We document significant heterogeneity across quantitative impact estimates, notably regarding the effect of capital regulation on loan growth. The average estimated effect is positive, but varies widely across studies. Studies that incorporate second-round (general equilibrium) effects, in particular, find a much more positive impact than those that do not. The difference is statistically significant and economically sizeable. This suggests that it is very important to account for the macroeconomic impact and other indirect effects of capital regulation.

Aldasoro, I, C Borio and M Drehmann (2018): " Early warning indicators of banking crises: expanding the family ", BIS Quarterly Review , March, pp 29-45.

Baker, M and J Wurgler (2015): "Do strict capital requirements raise the cost of capital? Bank regulation, capital structure, and the low-risk anomaly", American Economic Review Papers & Proceedings , vol 105, no 5, pp 315-20.

Bank for International Settlements (2018): " The financial sector: post-crisis adjustment and pressure points ", Annual Economic Report 2018 , Chapter III, June.

Basel Committee on Banking Supervision (2010): An assessment of the long-term economic impact of stronger capital and liquidity requirements , August.

--- (2011): Basel III: A global regulatory framework for more resilient banks and banking systems , June.

--- (2016): " Literature review on integration of regulatory capital and liquidity instrument s ", BCBS Working Papers , no 30, March.

--- (2019): "The costs and benefits of bank capital - an update since BCBS (2010)", BCBS Working Papers , no 34, forthcoming.

Bogdanova , B, I Fender and E Takáts (2018): " The ABCs of bank PBRs: What drives bank price-to-book ratios? ", BIS Quarterly Review , March, pp 81- 95.

Cerra, V and S Saxena (2017): "Booms, crises, and recoveries: a new paradigm of business cycle and its policy implications", IMF Working Papers , no WP/17/250, November.

Dagher, J, G Dell'Ariccia, L Laeven, L Ratnovski and H Tong (2016): "Benefits and costs of bank capital", IMF Staff Discussion Notes , no 16/04, March.

Financial Stability Board (2017): Framework for post-implementation evaluation of the effects of the G20 financial regulatory reform , July.

Gambacorta, L and A Murcia (2017): " The impact of macroprudential policies and their interaction with monetary policy: an empirical analysis using credit registry data ", BIS Working Papers , no 636, May.

Gropp, R, T Mosk, S Ongena and C Wix (2019): "Banks response to higher capital requirements: evidence from a quasi-natural experiment", Review of Financial Studies , vol 32, no 1, pp 266-99.

Harbord, R and J Higgins (2008): "Meta-regression in Stata", The Stata Journal , vol 8, no 4, pp 493-519.

Jordà, O, B Richter, M Schularick and A Taylor (2017): "Bank capital redux: solvency, liquidity, and crisis", NBER Working Papers , no 23287, March.

Khwaja, A and A Mian (2008): "Tracing the impact of bank liquidity shocks: evidence from an emerging market", American Economic Review , vol 98, no 4, pp 1413-442.

Macroeconomic Assessment Group (2010a): "Assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements - Interim Report", August.

--- (2010b): "Assessing the macroeconomic impact of the transition to stronger capital and liquidity requirements - Final Report", December.

Modigliani, F and M Miller (1958): "The cost of capital, corporation finance and the theory of investment", American Economic Review, vol 48, no 3, pp 261-97.

Romer, C and D Romer (2017): "New evidence on the impact of financial crises in advanced countries", NBER Working Papers , no 21021, March.

1  The authors thank Claudio Borio, Ben Cohen, Tara Rice, Hyun Song Shin and Nikola Tarashev for helpful comments. The views expressed in this article are those of the authors and do not necessarily reflect those of the BIS.

2  Users are invited to self-report by filling in a reporting template, downloadable from the website. The data collected are shared upon request; please send requests to [email protected] .

3  Those are relatively recent, and most often refer to those capital standards for which implementation is advanced enough to allow for analysis.

4  This latter effect is sometimes referred to as the "long-term economic impact" (BCBS (2010)). In the rest of this article, we use the term "long-term impact" to indicate the final effect of a regulation once banks have fully phased it in.

5  Following a tightening in capital standards, for example, a bank may retain earnings, raise new capital or shed risky assets ("deleverage"). The last option takes less time than the previous two, but is likely to have stronger overall economic effects (Gropp et al (2019), Macroeconomic Assessment Group (2010a,b).

6  There are several ways this can be done. In macroeconometric studies, the long-term impact of a policy change is typically associated with the lag structure of a dynamic model and calculated as the sum of lagged coefficients. This could also be used to measure the impact of regulatory changes, although few studies do so. More common are microeconometric studies, where the effect is often derived from the cross-sectional dimension of the data, eg by comparing, at a given point in time, the behaviour of banks that already comply with the new regulation with that of similar banks not subject to it or otherwise not having started their adjustment. Each approach has pros and cons. Cross-sectional comparisons could be misleading, as they rely on the assumption that the two groups of banks are similar otherwise. At the same time, compared with macroeconometric approaches they can better identify the effects of (changes in) banks' balance sheet conditions on loan supply. They can control for credit demand, for example through firm-time fixed effects. Another approach is using model simulations, which try to address selection, endogeneity and other issues, though these are very sensitive to the modelling assumptions. With its transparency, FRAME allows users to break down the estimates based on the specific approach used and assess robustness to the methodology.

7  As noted earlier, the transition effect probably depends on the way (and speed) banks adjust to the regulation.

8  Investors' required returns on equity are not directly observable and have to be imputed from an equity asset pricing model. The standard capital asset pricing model (CAPM) predicts that a bank's expected return on equity is proportional to its estimated equity beta, obtained by regressing the bank's excess returns on the excess value-weighted market returns (see eg Baker and Wurgler (2015)). Bogdanova et al (2018) provide an application.

9  Modigliani and Miller (1958).

10  One possible explanation could be that the two strands of the literature have been using different methodologies, with some addressing endogeneity issues better than others. Another explanation is that banks' internal markets do not operate as basic models suggest, creating segmentation, with capital adequacy requirements binding more in lending than in other business segments.

11  We assess whether the differences observed across studies reflect "genuine" heterogeneity (eg due to the true impact of regulation varying across countries, periods, methodologies) or "random" heterogeneity (eg due to the studies using different samples of observations for the same country, period, methodology, etc). The meta-analysis allows us to decompose the variance of the estimates into those two sources of heterogeneity. The key statistic is the I2, which is the percentage of the variance of the estimates that is attributable to genuine between-study heterogeneity as opposed to sampling variance. As a rule of thumb, heterogeneity is considered high when I2 > 75% (Harbord and Higgins (2008)). For a more detailed explanation of meta-analysis techniques applied to economics, see Gambacorta and Murcia (2017).

12  This result, which to a large extent is based on studies using a similar approach (BCBS (2010)), has recently been subject to debate. New findings by Jordà et al (2017) have shifted attention from the crisis prevention effects of capital to the cost containment benefits. Using more detailed bank balance sheet and crisis historical data, they conclude that bank capital "-has no value as a crisis predictor but does reduce crisis costs". But as there are still very few studies on the effect of regulation on the cost of crises (eg in terms of GDP loss; see Graph 3 ), this result has yet to be confirmed. FRAME does not cover the literature on the cost of crises per se (see eg Romer and Romer (2017) and Cerra and Saxena (2017)).

13  One state-of-the-art methodology (Khwaja and Mian (2008)) uses bank-firm loan data (typically from credit registries) and firm fixed effects in the regression to control for loan demand. Under the assumption that firms spread their demand equally across their respective banks, such fixed effects capture variations in loan demand from each firm towards each of its banks. Controlling for those, the effect of regulation or balance sheet ratios on banks' loan supply can then be identified by comparing the lending behaviour of the banks most affected by the regulation with lending by other banks. Accordingly, to account for the quality of estimates, we distinguish between studies using firm fixed effects (ie those that control for loan demand effects) and those that do not.

14  Those are typically estimates derived from macroeconomic analyses.

15  In a meta-regression, each observation is weighted by the inverse of the sum of its variance (here the standard error of the estimate) and the between-study variance (so-called "residual heterogeneity"). Graph 6 (left-hand panel) shows that there are negative point estimates. But because those negative estimates are not precise (their confidence interval extends over zero values; see Graph 7 , left-hand panel), they are not given large weights in the meta-regression. This explains why the average partial equilibrium effect is positive and statistically significant in the regression ( Table 2 , column 4, coefficient 0.29), in spite of some point estimates being negative.

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Consumer Financial Protection Bureau: Responding to the PHH Litigation

Ryan M. Johansen under the supervision of Howell Jackson

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U.S. Government Accountability Office

Securities Regulation: SEC's Oversight of the Financial Industry Regulatory Authority

FINRA is a securities industry organization that regulates over 3,400 U.S. securities firms. The Securities and Exchange Commission also regulates the industry. Reviewing FINRA's work is critical to SEC's mission of protecting investors and maintaining fair, efficient markets.

The Dodd-Frank Wall Street Reform and Consumer Protection Act requires us to review the SEC's oversight of FINRA in 10 specified areas, including conflicts of interest management and transparency of governance. We found SEC inspections covered all 10. Eight were examined in FYs 2021-2023 and the remainder before and after that period.

What GAO Found

In fiscal years 2021–2023, the Securities and Exchange Commission (SEC) initiated 21 program inspections of the Financial Industry Regulatory Authority, Inc. (FINRA). These inspections covered eight of the 10 issue areas specified in Section 964 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, including conflicts of interest management and transparency of governance. SEC covered the remaining two areas (former FINRA employees and advertising by FINRA members) in an inspection before 2021, and in a separate review in 2023, respectively. To identify changing risks and priorities for its inspections and examinations, SEC conducts annual planning that incorporates stakeholder input and assesses potential risks. SEC also identifies emerging risks through ongoing monitoring of FINRA, which includes its tips, complaints, and referrals process.

Section 964 Areas Covered in SEC Program Inspections of FINRA Initiated in Fiscal Years 2021–2023

In 2022, SEC established new outcome-based performance measures and goals in response to a prior GAO recommendation. SEC reported meeting its performance goals. For example, SEC met its target for findings for which FINRA agreed to take corrective action.

This is a public version of a sensitive report GAO issued in July 2024. GAO omitted from this report information that SEC deemed sensitive.

Why GAO Did This Study

FINRA, a self-regulatory organization, regulates more than 3,300 securities firms doing business with the public in the U.S. SEC oversees FINRA's operations and programs.

Section 964 of the Dodd-Frank Wall Street Reform and Consumer Protection Act includes a provision for GAO to triennially report on specified aspects of SEC's oversight of FINRA. GAO issued prior reports in May 2012 ( GAO-12-625 ), April 2015 ( GAO-15-376 ), July 2018 ( GAO-18-522 ), and a sensitive report in July 2021 (GAO-21-576SU) that was followed by a public version in December 2021 ( GAO-22-105367 ).

This report examines the (1) extent to which SEC's oversight in fiscal years 2021–2023 included the areas specified in Section 964 and ways in which it incorporated changing risks, and (2) SEC's steps to assess recent changes to its FINRA oversight.

GAO examined case files for SEC reviews of FINRA for fiscal years 2021–2023; reviewed SEC policies, procedures, and analyses; and interviewed SEC and FINRA staff.

For more information, contact Michael E. Clements at (202) 512-8678 or [email protected] .

Full Report

Gao contacts, media inquiries, public inquiries.

Back to Faculty Bibliography

John C. Coates, Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications , 124 Yale L. J. 882 (2015).

Abstract: Some members of Congress, the D.C. Circuit, and the legal academy are promoting a particular, abstract form of cost-benefit analysis for financial regulation: judicially enforced quantification. How would CBA work in practice, if applied to specific, important, representative rules, and what is the alternative? Detailed case studies of six rules—(1) disclosure rules under Sarbanes-Oxley section 404; (2) the SEC’s mutual fund governance reforms; (3) Basel III’s heightened capital requirements for banks; (4) the Volcker Rule; (5) the SEC’s cross-border swap proposals; and (6) the FSA’s mortgage reforms—show that precise, reliable, quantified CBA remains unfeasible. Quantified CBA of such rules can be no more than “guesstimated,” as it entails (a) causal inferences that are unreliable under standard regulatory conditions; (b) the use of problematic data; and/or (c) the same contestable, assumption-sensitive macroeconomic and/or political modeling used to make monetary policy, which even CBA advocates would exempt from CBA laws. Expert judgment remains an inevitable part of what advocates label “gold-standard” quantified CBA, because finance is central to the economy, is social and political, and is non-stationary. Judicial review of quantified CBA can be expected to do more to camouflage discretionary choices than to discipline agencies or promote democracy.

Cashing Out a Special Relationship?: Trends Toward Reconciliation Between Financial Regulation and Administrative Law

• February 2017
• See full issue

Like an optical illusion or an Escher drawing, the relationship between financial regulation and administrative law is intricate and prone to reflect one’s perspective. 1 From a distance, the fields may appear entirely in sync, even derivative. Financial regulation — legal structures governing markets, institutions, and actors — is formally bound by the procedural constraints of administrative law and that law limits agency action. 2 Yet on closer approach, the two show signs of serious inconsistencies. 3 The day-to-day practice of financial regulation operates relatively unimpeded by major elements of administrative procedure, and the larger commitments of administrative law — visions of ordered agency policymaking and expansive judicial engagement — remain largely unrealized. 4 Closest up, the fields offer stark contrasts on their first principles: each locates itself in divergent economic and political ecosystems and calls for separate end goals. 5

Juxtaposing financial regulation with administrative law thus seems to offer a paradox: the fields are coordinate in their basic descriptions but vaguely detached in day-to-day activities and misaligned on their points of deep logic. Perhaps for this reason, scholars have often struggled to understand how financial regulation fits within the administrative law scheme — whether it represents administrative principles applied to a transformative extreme, or else is a curious exception to the general norm. 6 Regardless of the reason, the result is a financial regulatory system that appears distinctive from many other forms of regulatory law: it is faster moving, opaque in its decisionmaking, and highly oriented to preventing crisis — at the cost of some inconsistency with general administrative procedure.

Recently, however, a new leveling wind has begun to blow. In a number of cases at the boundaries of the two fields, courts have applied rigid constraints of administrative law to resolve relatively amorphous financial regulatory issues. These cases express a strong set of presumptions about how financial regulation should be conceptualized and administered. 7 They reject views of financial regulation as demanding a tailored approach, and instead seek to cover the field with off-the-rack administrative law doctrines. Underlying this movement are two broad yet congruent thoughts: a heightened concern for a perceptibly overpowering financial regulatory apparatus 8 and increased confidence in the methods of administrative law, most notably a heavily monetized cost-benefit analysis (CBA). 9 The result is an approach treating financial regulatory action as largely indistinct from any other subject of agency policymaking.

Yet this impulse toward a one-size-fits-all framework eludes the reasons why approaches to financial regulation have and should be tailored to their circumstances. This normalization trend applies administrative tools to situations outside the scope of their design and contradicts the major principles underlying the modern financial regulatory state. 10 The result is both overinclusive in limiting necessary exercises of regulatory power and underinclusive in confounding the areas of most pointed concern. Rather than attempting to channel the anxieties generated by regulatory policymaking through such an untailored approach, the impulses driving the normalization trend should be realized in a more nuanced and limited form. 11

Part I of this Note outlines the conceptual relationship between administrative law and financial regulation. Part II grounds the trend in history. Part III identifies the countertrend of financial regulatory normalization, as found in three recent decisions straddling the administrative-financial regulatory line: Business Roundtable v. SEC , 12 State National Bank of Big Spring v. Lew , 13 and Metlife, Inc. v. Financial Stability Oversight Council . 14 Part IV discusses the latent concerns behind this development and suggests reasons why a more tailored approach acknowledges anxieties and better achieves the intended ends.

I. The Uneasy Relationship Between Financial Regulation and Administrative Law

Delineating between financial regulation and administrative law proves a surprisingly involved task, not least because each of the fields contains both a central core and a larger periphery. 15 On the broadest level of definition, nonetheless, one might see few inconsistencies and perhaps major connections. The top-level boundaries of administrative law are marked by issues of procedure, with a matter called administrative if its decisionmaking is sufficiently developed. 16 In turn, the basic definition of financial regulation involves questions of substance, with boundaries based on the nature of the thing regulated. 17 To be sure, the latter’s limits may be rather blurry: while matters like banking, insurance, or investment management are clearly within the scope, matters like securities, pensions, or consumer credit raise questions. 18 Nonetheless, at least on principle, these two definitional questions seem entirely congruent. One thus might view financial regulation as a clear subset of administrative law akin to environmental law: realizing its policy through administrative means. 19

Even at this degree of highest definition, it is striking not how much financial regulation incorporates administrative procedure, but how much it does not. For example, few Federal Reserve Board decisions face judicial review in the form contemplated by the Administrative Procedure Act 20 (APA). The substantial role of private financial regulators complicates public administrative law’s generally exclusive status. 21 Most illustratively, the Chevron doctrine is nearly entirely absent from the financial regulatory sphere. 22 One might respond that the APA includes explicit allowance for exceptions, 23 and thus the fact of financial regulation’s day-to-day practices does not necessarily imply its independence from that broader law.

Yet such responses may miss a larger point. Legal fields are not just assortments of doctrine but also larger statements about the world that doctrine shapes. 24 In administrative law, the broad vision includes a formalized policymaking process, restrictions on agency decisionmaking, and an expansive role for judicial review. 25 On this conception, administrative law represents carefully balanced compromises about means of crafting policy, and legal doctrines seek to realize those commitments. 26 That deep view may even sometimes conflict with its shallower expressions: for example, the standing doctrine implied by the APA differs from that of current law. 27 An understanding of financial regulation as coextensive with the APA has a more difficult time incorporating this result than one that views the law as an instrumental means to larger (here, separation of powers) values.

The broader vision of financial regulation takes a different and somewhat contradictory tone. Financial regulation is marked by a strongly outcomes-focused attitude, defining itself by problems to be solved rather than abstract values to be realized. 28 It thus preferences quickness over deliberation, willingness to decide based on limited information, and a general faith in market behavior. 29 Where administrative law seeks to distribute powers among government branches, financial regulation aims to secure regulators’ authority against regulated entities. 30 If the key anxiety of administrative law is that power might be exercised arbitrarily, the worry of financial regulation is that no power will be exercised at all. 31

Thus, in many ways, the practice of financial regulation shows as much variability as overlap with administrative law. 32 Take the process of day-to-day banking supervision. These procedures tend toward extreme informality, “enforced through phone calls and jawboning, rather than through enforcement orders and prohibition.” 33 Moreover, the standards for what such decisions entail may be loose or even somewhat irregularly formed. 34 Under the view of administrative law, this conduct might seem the definition of impermissibly arbitrary action. For a financial regulator, by contrast, concerns about accountability and transparency pale in comparison to those of context: the best decision tomorrow might be worse than a more arbitrary one today. 35

II. Historical Roots of a Controversy

Financial regulation and administrative law have not always been so divided. Indeed, the fields were largely coterminous in their nascence. 36 Both fields are, of course, children of the New Deal era, where administrative law developed to execute the budding financial regulatory system. 37 Understanding how the systems evolved and grew apart thus sheds light on the scope of controversy today.

Even eighty years on, “the basic financial regulatory structure is a New Deal legacy.” 38 Scholars have told, and overtold, the story of how the U.S. financial regulatory system evolved as a reaction against the excesses of the 1920s, an attempt to stem an intractable economic downturn, and an effort to leverage the mediating power of government toward broad societal benefit. 39 The New Deal years saw the creation of many of the most prominent of today’s agencies: the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve’s Open Market Committee, and, of course, the Securities and Exchange Commission (SEC). 40 Yet while these agencies enjoyed new substantive powers, arguably the more important development was the growth in means of their administrative decisionmaking. 41 Where previous financial regulators enjoyed relatively limited policymaking fora, New Deal–era agencies enjoyed both numerous new procedural powers as well as newfound freedom to choose among them. 42 Indeed, at the end of the period, the Supreme Court famously upheld agencies’ power to make such procedural choices as instrumental to their mission. 43

In administrative law, the New Deal era was likewise a time of ferment, and the 1946 passage of the APA largely reflected lessons of New Deal–era practice. 44 An overwhelming amount of this formation occurred in the financial regulatory space. Many major intellectual influences in administrative law came out of a financial regulatory background, and subsequent work has highlighted the degree to which early conceptions of administrative law reflected financial regulatory practice. 45 Take, for instance, the paradigmatic example of Professor James Landis, early SEC Commissioner and author of the canonical The Administrative Process . 46 Landis’s skepticism about separation of powers was almost certainly informed by the SEC’s expansive powers to combine authorities — a combination Landis viewed as essential to effective policymaking. 47 Nor was Landis an outlier in these views; indeed, one retrospective of the period has emphasized the “consistent pattern of deference to the SEC” in validating the agency’s design. 48

The New Deal–era connection between administrative law and financial regulation succeeded largely on the basis of the former’s concession to the latter’s regulatory needs. Financial regulation existed — arguably quite successfully — with a relatively thin layer of administrative law oversight. 49 For Landis and other New Dealers, the purpose of administrative law was an instrumental good rather than an end goal: the field aimed to authorize greater discretion than previous legal regimes had enabled. To be sure, history also suggests that thin review need not imply total judicial abdication. 50 Nonetheless, the New Deal indicates that coordination between financial regulation and administrative law proves most successful when financial regulation enjoys full procedural choice, even over administrative law concerns for accountability and standardization in policymaking form.

Subsequent years have seen the substantive relationships between administrative law and financial regulation — the former shaping itself to the substantive needs of the latter — drift increasingly apart. Scholars have offered explanations for why this movement occurred, including economic developments demanding new financial approaches, shifts in administrative rulemaking focus from economic to social risks, and developments in the nature of legal scholarship. 51

That degree of disconnect may be most evident in the departure from the New Deal–era conception that financial regulation and administrative law enjoyed no substantial tradeoffs. 52 During the New Deal era, agencies portrayed the substance of regulations as involving choices of normative values, while administrative law mostly involved ministerial considerations regarding the execution of those wishes. 53 Today, by contrast, administrative law is often tagged with political connotations, as it appears to implement the vision of how government should relate to affected parties. 54 Moreover, one increasingly prevalent view of financial regulation casts it as a largely apolitical effort; neither bankers nor their regulators benefit from a market crash, after all. 55 One might push back on that argument, pointing to concerns like agency capture or somnolence. 56 The point is not that arguments for discretion ignore these concerns; rather, they evaluate them as less harmful than the cost of crippled policymaking. 57

The result, at least until recently, was that while financial regulation engaged with some doctrines of current administrative law, the fields willingly disengaged on others. Take, for example, the use of international standards. As Professor David Zaring has noted, an increasing amount of regulatory policy comes through internationally negotiated agreements: accords on proper means for evaluating anticompetition or emissions standards, for example. 58 Such efforts raise substantial domestic concerns about appointments and delegation, and these agreements have made little headway with most regulatory agencies. 59 Yet financial regulators have had no trouble incorporating such agreements into their work, and where challenged, courts have been willing to accept a view of financial regulatory agencies as excepted from generally applicable administrative law requirements. 60 In this realm, agencies enjoy an individualized review designed for their industry and purposes, with general doctrine informing but not finalizing the law to which the agency is bound.

The financial crisis of 2008 complicates this picture. While the tumult had many fathers, one particularly strong critique blames the financial regulatory agencies’ blinkered visions for exacerbating the crisis, most notably in their perceived failure to confront an out-of-control industry. 61 The crisis also sparked a number of ancillary concerns, including a critique of so-called “revolving door” staffing, 62 and it cost agencies regulatory prestige. One might push back on the indictment, since failure in an industry is not necessarily identical to the failure of regulators. Perhaps unsurprisingly, some observers since 2008 have questioned the unique structures of financial regulation and suggested a return to the unadulterated constraints of administrative law. 63 This solution, once sublimated, is increasingly coming to the fore.

III. The Era of Convergence

A series of recent scholarly projects have attempted to reject rigid yet increasingly questionable distinctions between financial regulation and administrative law and draw them closer together once more. A limited form of this project argues that the two fields share substantial types of problems and can learn lessons from one another: administrative law in financial regulation’s ability to match structure to the crisis at hand, financial regulation in administrative law’s emphasis on creating quantifiable guideposts for judicial review. 64 A more ambitious version sees financial regulation and administrative law as almost entirely overlapping, and financial regulation benefitting from drawing upon administrative law’s relatively more defined structures. 65

It might seem that these arguments are speculative, describing a distant future. Yet a closer examination of the trends on the ground suggests that reality may be accelerating well ahead of theory. A series of recent cases at the border of administrative law and regulatory practice offers a robustly developed treatment of financial regulatory issues as largely administrative in form and rejects a more focused financial regulatory approach. If the era of financial regulatory normalization is approaching, these cases are its vanguard.

Business Roundtable v. SEC involved a challenge to the SEC’s recently promulgated proxy access rule, an apparently technical subject with larger immediate challenges and even more significant implications. 66 Prior to the case, new statutory authority had allowed the SEC to promulgate a rule requiring companies to streamline the process of shareholder access to proxy cards for elections to a company’s board. 67 The SEC readily promulgated an expansive new rule. 68 A number of business groups objected to this output on grounds that the regulation imposed a substantial burden for comparatively low gain. 69 While the SEC had conducted a notice-and-comment procedure and informally assessed the justifications for the regulation for itself, it had not promulgated a full CBA. 70 In part, as the SEC viewed the issue, the importance of the subject compelled quick movement: the rulemaking expressed the view that the rule would substantially promote market efficiency and might even have limited the 2008 financial crisis. 71 With such great gains apparently available, it is perhaps understandable why the SEC viewed drawbacks as obviously less significant.

The D.C. Circuit nonetheless invalidated the rule. The key to the decision was the APA’s provision that courts reject agency actions that are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 72 The arbitrariness here came from the agency’s refusal to conduct a fleshed out CBA. 73 The court saw that avoidance as particularly salient because it perceived a mandate that the SEC “apprise itself — and hence the public and the Congress — of the economic consequences of a proposed regulation.” 74 Notably, the court did not (and could not) find that this requirement was explicitly imposed by the Commission’s organic statute, or else by practice; rather, it constructed the mandate through reading implications of similar provisions elsewhere in the statute as authorizing the rule. 75

Much ink has been spilled over the decision in Business Roundtable , perhaps more so than for any other financial regulatory case of the past decade. Scholars have taken issue with the claim that the Commission’s CBA was limited or haphazard, pointing out that the analysis did consider the factors highlighted by the court — the court simply disagreed on the ultimate evaluation. 76 Beyond the narrow factual disputes about the decision’s internal correctness, observers have expressed even greater consternation at the highly substantive review offered by the Business Roundtable court, a form of review strongly at odds with understandings of agency expertise. 77 Where most reviews of agency actions take issue with procedural invalidity, or else with evidence so overwhelming that it makes an opposite decision arbitrary or capricious, the Business Roundtable court took the unique approach of substantively weighing for itself the factors that the agency itself had previously considered. 78

Yet perhaps the most intriguing element of Business Roundtable is the threshold assumption that CBA represents an appropriate lens for financial regulatory decisionmaking and subsequent judicial review. Professor John Coates, for example, has pointed out the mismatch between the questions CBA best evaluates and the sets of concerns that financial regulation can address. 79 As he argues, CBA functions best in places of relatively known variables, a static environment, and few externalities. Finance’s centrality to the economy, its lack of stability, and significant noneconomic implications challenge all of these conditions. 80 If there ever were a place to find CBA inapposite — or at least limited — financial regulation would appear to be it. 81

That Business Roundtable thus saw not just the possibility but the necessity of sophisticated CBA in financial regulation suggests a larger vision about the expansion of administrative law constraints to even the most distant fora. CBA has gained significant ground in administrative law, so much so that a reasonable argument exists that an agency decision not run through the matrix of CBA lacks rationality by definition. 82 In turn, advocates of CBA argue that the tool is useful both in constraining perceptibly excessive agency discretion and in laying bare otherwise obscured agency assumptions to facilitate more extensive judicial review. 83 This assertion — apparently at play in Business Roundtable — stands at striking odds with key principles of financial regulation. 84 Historically, financial regulators’ broad procedural discretion has enabled CBA adopted on a voluntary basis and only lightly reviewed later. 85 By endorsing a vision of CBA and highly substantive subsequent judicial revaluation as the default rather than the exception, Business Roundtable imposed significant barriers to regulatory policymaking, but it even more notably rejected the elements that make financial regulation distinctive.

If Business Roundtable demonstrates how the tools and coordinate assumptions of broader administrative law can be applied to financial regulatory practice to an unexpected degree, State National Bank of Big Spring v. Lew demonstrates how implicit understandings about those tools increasingly infect judicial engagement with financial regulatory decisionmaking. In the case, the eponymous bank, joined by a number of other plaintiffs, challenged new legal authorities in the Dodd-Frank Wall Street Reform and Consumer Protection Act 86 (Dodd-Frank): the Financial Stability Oversight Council (FSOC) and the Orderly Liquidation Authority (OLA). 87 The plaintiffs argued that FSOC raised significant separation of powers issues in the establishment and enforcement of its decisions. They also asserted that the OLA could result in an arbitrary exercise of government power and would thus constitute a taking of plaintiffs’ property. 88

The D.C. Circuit found for the government on entirely procedural grounds. The court avoided the challenge to FSOC’s substantive powers, since the procedural posture of the case involved firms in the same industry attempting to apply the doctrine of competitor standing — a claim the court viewed as “simply too attenuated and speculative” in these circumstances. 89 The court likewise applied doctrines of standing and ripeness, doctrines instrumental in administrative law, to reject the OLA-based challenge, perceiving that it was “premature for a court to consider the legality of how the Government might wield the [OLA] in a potential future proceeding.” 90 The court did allow the bank’s challenge to the constitutionality of the Consumer Financial Protection Bureau (CFPB) to proceed on grounds that challenges to the existence of agencies regulating the plaintiffs themselves are permissible. 91

State National Bank might seem a run-of-the-mill administrative law case, but this ordinariness is itself the point. Administrative law doctrines pose unique challenges for parties in the financial regulatory realm, so much so that they have rarely been applied in full force to many financial regulatory decisions. 92 Given the complex and often opaque nature of financial markets, showing direct connections or the nature of the harm to a legally cognizable degree of precision proves a particularly difficult task. For example, a demonstrated drop in bond prices owing to the designation may be more opaque than a factory closure. 93 Moreover, given the uncertainty inherent in those markets, it can often be difficult to predict which parties, even if nominally all under the same aegis, are actually likely to bear regulatory burdens, and which assertions of harm are merely hypothetical. 94

The traditional reconciliation of the high burdens of general administrative law with the unique circumstances of financial regulation has been a rather light and narrowly tailored application of doctrines like standing and ripeness. 95 Even if one sees State National Bank ’s procedural posture as ambitious, the multifaceted nature of financial regulation makes it difficult to draw a principled line that would distinguish this case from an unquestionably meritorious challenge. The general administrative approach may thus prove unwelcome, since the subject of financial regulation is so dissimilar to the usual administrative decisionmaking.

State National Bank thus illustrates and potentially exacerbates the difficulties that administrative law procedural doctrines have in the realm of financial regulatory action. Even prior to the case, observers had warned that such doctrines were inappropriate given the unique nature of financial regulation and worrisome policy outcomes. 96 State National Bank may accelerate these concerns. Following the decision, observers in other financial regulatory fields have noted general uncertainty about when administrative law doctrines apply at procedural stages and thus constrain agency policymaking or citizens’ rights, or whether financial regulatory procedural standards still apply. 97 One might wish to view State National Bank as a one-off case — the strangeness of its posture limiting its impact — but the assumptions implicit in the case may bear in other lights.

MetLife, Inc. v. Financial Stability Oversight Council demonstrates how substantive and procedural elements of administrative law can yield more significant effects on financial regulation than either element alone. The case again involved a challenge to a systemically important designation, this time by a firm so designated: Metlife. 98 Metlife’s petition alleged a host of complaints, but the most significant issue that Metlife raised was an alleged failure by FSOC to fully consider the impacts on Metlife of this particular designation and thus the need for FSOC to design its procedures to incorporate more vigorous due process protections. 99

The court found for Metlife on these grounds and rescinded its designation as a systemically important financial institution. 100 Crucial to its conclusion was its understanding that full CBA applied in this case. The Metlife court read two recent Supreme Court opinions, Michigan v. EPA 101 and Whitman v. American Trucking Ass’ns , 102 as creating a strong presumption that CBAs are applicable in regulatory actions. 103 The government had pointed out the lack of a clear statutory demand for CBA in FSOC’s decisionmaking and suggested the principle that what is not explicitly included in a statute is left to agency discretion to adopt or not adopt as it sees fit. 104 By contrast, the court saw the statutory silence in entirely different terms: the fact that CBA wasn’t explicitly prohibited by statute suggested its inclusion, given what the court read as the crucial background assumption of mandatory CBA. 105 On this view, FSOC “intentionally refused to consider the cost of regulation,” violating “a consideration that is essential to reasoned rulemaking,” and thus the designation could not stand. 106

In one sense, Metlife represents yet another articulation of the expansive use of CBA in the financial regulatory realm, in a manner largely similar to that of Business Roundtable . Yet Metlife ’s internal logic and normative implications offer a more expansive vision of the applicability of administrative doctrines than Business Roundtable itself suggested. The court in Business Roundtable saw the mandate for expansive CBA in that case as derived from the specific context of the SEC’s decisionmaking: the SEC not only had to conduct CBA, but it also had to do so to a maximum degree of effectiveness. 107 By contrast, the Metlife court read the CBA requirement as a general background rule of law, not one derived from specific context. 108 If any circumstance would seem to justify a departure from a CBA requirement, this case’s decisionmaking backdrop of relatively high epistemic uncertainty, substantial technical considerations, and convoluted consequence would seem to qualify. Indeed, such grounds have often previously justified financial regulation’s departure from general administrative law norms. 109 That the Metlife court, by contrast, saw itself as capable of assessing the metacosts and metabenefits of a CBA speaks to a more engaged judicial role.

Beyond its specific implications for the future of CBA in financial regulation, Metlife also matters for the idea of administrative procedural choice in financial regulation. Financial regulatory agencies have typically focused relatively little on issues of transparency and decisionmaking regularity, which are more concerning to their administrative counterparts. 110 Indeed, some scholarship suggests that agencies’ powers to shape procedures to the challenges they face are inherent to the business of financial regulation, much more so than they are to general administrative law. 111 Further, scholars have argued that CBA in the financial regulatory realm offers metacosts exceeding its metabenefits. 112 Yet there is also a larger point on the question of who gets to choose. Historically, financial regulation has assumed that agencies would take the lead in deciding issues of design, with the courts playing a small and even subordinate role. 113 By endorsing a more vigorous review on both procedure and substance, Metlife speaks to an entirely new vision of how the field should operate.

IV. The Doctrine (?) of Financial Administration

Taken apart, Business Roundtable , Metlife , and State National Bank each lays individual markers for an expansion of the tools of general administrative law to financial regulatory action. Taken together, they suggest an overarching indication. If one case is an anecdote, two a trend, and three a doctrine, the cases offer indications on how these related areas of the law are developing, and why. Yet efforts to normalize financial regulation offer their own concerns. If financial regulation and administrative law enjoy their special relationship because of differences in their deep logic, an approach treating financial regulation as indistinguishable from any other form of regulatory law will suffer serious deficiencies. Instead, it would be more consistent with both the history and purpose of financial regulation and administrative law to neither embrace the normalization trend entirely nor reject it as a whole; rather, courts ought to insist that any engagement must be careful, discerning, and individualized to the situation at hand.

The most obvious first factor explaining the evolution of the financial regulation–administrative law relationship is the scope of financial regulation’s new powers. Indeed, both State National Bank and Metlife dealt with authorities established under the most significant alteration in financial regulatory authority since the New Deal era: Dodd-Frank. 114 Dodd-Frank has many elements, but the law is perhaps best understood as an attempt to address perceived gaps in the traditional system of financial regulation by creating a series of powers overlapping these gaps. 115 Dodd-Frank’s powers are expansive and subject to relatively few external controls. 116 Unlike its regulatory predecessors, Dodd-Frank’s powers exist with relatively low degrees of internal constraint. 117 This combination of strong new powers with an increasingly adversarial regulatory focus has caused some scholars to see the law as introducing a quintessentially administrative law-style character to the financial regulatory space. 118

At the same time, new administrative tools seem to offer a potent (if ultimately illusory) means of providing judicial oversight over an otherwise unconstrained regulatory system. Even if the result was inapposite, the Business Roundtable and Metlife courts were not capricious in their choice to focus on CBA. Experience from other areas of administrative law suggests that CBA can be highly effective in ensuring that otherwise opaque or unaccountable agencies reconcile themselves to more coherent policy outputs. 119 More broadly, the substantial doctrines of modern administrative law have done much to constrain agency policymaking discretion — so much so that anxieties about runaway bureaucracies have largely been replaced by the opposite concern about “ossified” regulators. 120 In this light, it may matter less whether particular elements like CBA are fully appropriate; what may matter more is the logic from which out-of-control agency policymaking seems to demand some method of constraint. CBA specifically — and administrative law generally — ostensibly offers that check.

Taken apart, the combination of greater need for control and enhanced tools to achieve that control go a long way to explaining why financial regulatory normalization may be happening, and why now. Taken together, they also help explain particularly questionable elements behind the trend. In Business Roundtable , for example, it may seem incongruous that a generalist court viewed itself as more capable than the specialist administrators. If one reads the case to imply some skepticism that the SEC’s administration was analytical rather than pretextual, and the court’s stronger view of CBA as a close-enough substitute for that expertise, then the decision may appear to enjoy greater justification. 121

The approach of treating financial regulation as an ordinary subject of administrative law thus derives from real concerns, but even on those terms, the merger may harm more than help. To start, it is not clear whether the doctrines of general administrative law enjoy a more rigorous intellectual foundation than the ad hoc application of usual financial regulation. Even attempts to apply specific administrative law tools offer their own unique sets of concerns; for example, the most recent high-profile application of CBA, Michigan v. EPA , may have involved significantly more complicated concerns than the Court’s analysis revealed. 122 Perhaps some individual error is a reasonable tradeoff for systemic gains, but it is not clear how quickly the costs become “impossibly daunting.” 123

The challenges of administrative law are not unique to financial regulation, but they are amplified to an extreme degree in this space. To start, a major critique of hard look agency policing points to the gap between agency specialist knowledge and courts’ comparative institutional limitations. 124 The highly sophisticated elements of financial regulation heighten those concerns. Likewise, strong doses of judicial review raise concerns about judges substituting their own values for those of the underlying agencies, a concern even further amplified where, as in financial regulation, the relevant risks “have a speculative character.” 125

Other elements particular to financial regulation suggest reasons for discomfort with applying usual forms of administrative law to that field without any alteration. For example, it is unclear how one key principle underlying modern financial markets — that future directions are not subject to present knowledge — can be reconciled with sophisticated quantitative analysis, given that highly monetized analyses are meant to incorporate such future values. 126 Likewise, the contingent impacts of mechanisms like the OLA fit uneasily with usual standing and ripeness doctrines and offer comparatively few options for judicial remedy. 127 It might be possible to carve out special financial regulatory exceptions from general standing rules, for example, but this approach would hardly suit the one-size-fits-all approach desired by supporters of financial regulatory normalization.

Most important, perhaps, is the degree to which the application of an off-the-rack version of administrative law contradicts key principles underlying current financial regulatory mechanics. One crucial ideal behind Dodd-Frank is an increased need for agency responsiveness, particularly in crisis. 128 Administrative law, by contrast, aims to be fundamentally deliberative, focused on the “need for checks and controls” to prevent agency overzealousness. 129 Yet if one’s object is solving the most exigent challenges, it is hard to see how any zeal would be excessive.

The full, standardized doctrines of administrative law thus prove an uneasy fit with the theory and practice of financial regulation. Yet it would be overbroad to say that courts face a choice to either conduct such an extensive judicial review that it enervates agency policymaking, or else leave agencies entirely unchecked. If financial regulatory normalization proves a difficult medicine when taken as a whole, moderate doses of its elements may offer less cause for concern and may even prove salutary to the system’s general effectiveness.

To start, the administrative law tools for policing the boundaries of agency jurisdiction offer significant advantages in the financial regulatory realm. In other administrative areas, courts have historically acted to ensure agencies stand within defined limits. 130 By contrast, financial regulatory agency powers are notoriously ill defined, and the complexity of the newest set of authorities only exacerbates that issue. 131 The boundary-setting tools of general administrative law may thus be worth importing wholesale into the financial regulatory space. In practice, those tools would imply a modest but effectual role for the courts in policing agency jurisdiction, emphasizing a livable settlement between agencies and regulated parties. 132 Jurisdictional determinations also stand within the realm of court expertise and raise few concerns about the timing or extensiveness of that engagement. 133

At the same time, anxieties about the form of agency policymaking could be addressed through a similarly focused inquiry into the structures of internal agency decisionmaking. General administrative law recognizes that effective divisions of power within agencies offer advantages such as more accurate determinations, protections against biased processes, and greater likelihood of protecting individual rights. 134 These concerns are no less trenchant in financial regulation, as demonstrated by a recent D.C. Circuit decision striking down the CFPB’s single-director structure. In PHH Corp. v. CFPB , 135 the court applied a number of examples from general administrative law to find that the Bureau “departs from settled historical practice” and “threatens individual liberty far more than a multi-member independent agency does.” 136 Yet PHH also suggests that courts may effectively tailor approaches to particular regulatory circumstances: in this case, for example, the court relatively intensively engaged with the organic Dodd-Frank scheme and intended CFPB function to find a remedy of eliminating the Director’s for-cause removal requirement, rather than closing the Bureau altogether. 137

By contrast, effective scrutiny of the substance of financial regulatory policymaking likely falls between the strongly substantive inquiry of Business Roundtable and the hands-off approach of State National Bank ; the former limits any exercise of agency discretion, while the latter fails to conceptualize elements making financial regulation unique. Rather than inquire into the adequacy of the substance or procedure at issue, a court could instead ask whether the procedures emerged through a rational process. Specifically, a court could inquire whether an agency enjoyed sufficient reason for choosing the procedure that it did. 138 To the extent that this is (or should be) the state of play in broader administrative law, the applications to the financial regulatory field would seem to prove even more compelling. After all, much of the pushback to Business Roundtable pointed out that more comprehensive reviews could discourage otherwise valid agency action. 139 Yet high-level procedural rationality review would also allow means of policing agency misconduct: if it is true, for example, that the SEC in Business Roundtable intentionally chose a relatively low level of CBA to avoid the conclusions that a more vigorous analysis would have offered, then that procedural choice would lack rational justification, and a court could (and should) exercise a more intensive and skeptical review. 140 By contrast, a CBA chosen in good faith but poorly executed would not necessarily violate procedural-rationality review’s requirements — allowing courts to avoid rewarding litigants for “waging in a judicial forum a specific policy battle which they ultimately lost in the agency.” 141

Taken together, these three approaches offer a relatively consistent, tailored approach, bringing the most effective parts of administrative law into financial regulation. This proposal rests on the idea — common in modern administrative law — that those best positioned to evaluate the substance of agency action are those closest to the scene. 142 On this vision, agencies are prevented from overreach through jurisdictional policing and from underreach by strong internal checks reducing any points of particular pressure. These two sets of policing tactics orient agencies toward the political process, while a review of the rationality of an agency’s procedural choice addresses at least some concerns about agency capture or somnolence.

In practice, this system implying vigorous judicial review of the borders of agency policymaking and relative deference at the center might seem to offer relatively little difference for the run-of-the-mill circumstances. Take, for example, some challenge to a new set of bank capital standards. Under a traditional view of financial regulatory exceptionalism, such decisions might enjoy substantial deference from the courts — perhaps complete deference if adopted through the mechanisms of global agreement. In contrast, if understood as an ordinary exercise of administrative law, such a decision would face a more restrictive set of constraints — such as concerns about substantive arbitrariness, delegation, or rationality — which would potentially impose greater hurdles. The limited version of administratively normalized financial regulation would attempt to thread the two needles: if promulgated by an agency with proper jurisdiction and sufficient internal checks, and so long as sufficient reasons for the decision existed, such promulgations would be presumptively valid. For those objecting to the content of the regulation, their remedies would be through intellectual or political means — not through the courts.

If marginally more efficient for the average case, the edge problems offer perhaps the strongest arguments for such tailored normalization of administrative law. Procedural-rationality review would likely lead a case like State National Bank to emerge the same way, albeit on substantially different grounds. For the court there, the usual administrative law principles of standing and ripeness enjoyed priority over the existence of concerns specific to financial regulation. 143 A more limited approach would, by contrast, simply refuse to engage in such a balancing act, so long as the agency made a reasoned choice. Meanwhile, the process of tailored review would suggest different outcomes for Metlife and Business Roundtable , unless one views FSOC as so unconstrained that it violatedconstitutional norms. In those cases, however, the decisions would speak to the substantive concerns at issue, rather than through second-order approaches.

This is not to say that this approach would be without demerits — even administrative agencies suffer inconsistent structures, and the line between review of arbitrariness in choice and arbitrariness in substance may be blurry. 144 Yet its greatest strength would be to reconcile the major principles of administrative law and financial regulation. If administrative law’s adherence is to an ex ante rationalized decisionmaking system, then such an approach would offer those clear procedural precommittments. If financial regulation, by contrast, rests on the ideas of flexibility, responsiveness, and choice, then such an approach would offer that power, within the defined box.

Conclusion: A New Way Forward

Financial regulation and administrative law are thus related, but ultimately distinct, fields. Comparing the two shows areas of overlap but also areas of robust and deservedly continued differences. While the two enjoy similarities on a superficial level, the logical commitments underpinning each field yield significant dissimilarities. As demonstrated in practice, the wooden application of administrative law doctrines in the setting of nuanced financial regulatory actions risks harming both domains. That the fields are and should be engaged remains clear, but what the move toward financial regulatory normalization suggests is that such engagement, like any good suit, should be tailored.

^ See Gillian E. Metzger, Through the Looking Glass to a Shared Reflection: The Evolving Relationship Between Administrative Law and Financial Regulation , 78 Law & Contemp. Probs ., no. 3, 2015, at 129 (drawing distinctions between the fields and developing lessons shared).

^ See id . at 129 (“[F]inancial regulation is, after all, a form of administrative governance to which the general transsubstantive requirements of administrative law would naturally apply.”); see also Eric J. Pan, Understanding Financial Regulation , 2012 Utah L. Rev. 1897, 1902–07 (contextualizing financial regulation within larger principles of regulation).

^ See Michael S. Barr, Comment, Accountability and Independence in Financial Regulation: Checks and Balances, Public Engagement, and Other Innovations , 78 Law & Contemp. Probs ., no. 3, 2012, at 119, 120 (“[F]inancial regulation often raises unique problems that may not neatly align with the literature on administrative law mechanisms . . . .”).

^ See David Zaring, Administration by Treasury , 95 Minn. L. Rev. 187, 199–203 (2010).

^ See, e.g. , Metzger, supra note 1, at 142–44 (discussing differences on the role of the markets).

^ Compare David Zaring, Rule by Reasonableness , 63 Admin. L. Rev. 525, 543–49 (2011) (seeing financial regulation as cognizable in administrative terms), with Kristin E. Hickman, Coloring Outside the Lines: Examining Treasury’s (Lack of) Compliance with Administrative Procedure Act Rulemaking Requirements , 82 Notre Dame L. Rev. 1727 (2007) (viewing a state of curious exceptionalism).

^ Cf . Jacob E. Gersen, Recent Development, Administrative Law Goes to Wall Street: The New Administrative Process , 65 Admin. L. Rev. 689 (2013) (attempting to reconcile “new institutional arrangements” with “the administrative law framework into which they are to be slotted,” id . at 692).

^ See, e.g. , Thomas W. Merrill & Margaret L. Merrill, Dodd-Frank Orderly Liquidation Authority: Too Big for the Constitution? , 163 U. Pa. L. Rev. 165, 171 (2014) (analyzing the purported unconstitutionality of one key new provision).

^ See, e.g. , Robert B. Ahdieh, Reanalyzing Cost-Benefit Analysis: Toward A Framework of Function(s) and Form(s) , 88 N.Y.U. L. Rev. 1983, 2065–72 (2013).

^ See John C. Coates IV, Cost-Benefit Analysis of Financial Regulation: Case Studies and Implications , 124 Yale L.J . 882 (2015) (critiquing the intellectual foundations of strong CBA).

^ For an argument that this is the current state of administrative law, see Jacob Gersen & Adrian Vermeule, Thin Rationality Review , 114 Mich. L. Rev. 1355 (2016).

^ 647 F.3d 1144 (D.C. Cir. 2011).

^ 795 F.3d 48 (D.C. Cir. 2015); see also Recent Case, State National Bank of Big Spring v. Lew, 795 F.3d 48 (D.C. Cir. 2015) , 129 Harv. L. Rev. 835 (2016) (discussing that case).

^ C.A. No. 15-0045, 2016 WL 1391569 (D.D.C. Mar. 30, 2016).

^ Cf . Gillian E. Metzger, Foreword, Embracing Administrative Common Law , 80 Geo. Wash. L. Rev. 1293, 1298–1304 (showing the “dominance” of administrative common law over thinner statutory structures, id . at 1298).

^ See Daniel A. Farber & Anne Joseph O’Connell, The Lost World of Administrative Law , 92 Tex. L. Rev. 1137, 1152–54 (2014) (arguing that agencies are defined by the reasonableness of their procedures).

^ See Charles K. Whitehead, Reframing Financial Regulation , 90 B.U. L. Rev. 1, 3 (2010) (noting the division of “regulation of financial intermediaries into categories . . . based on the functions, products, and services they provided at the time”). Defining financial regulation itself proves tricky. Perhaps the best way to conceptualize it, then, is in the nature of the concerns that a regulation aims to forestall: to wit, crisis.

^ Cf . id . at 21–25 (discussing how to conceptualize nonbank actors with significant bank-like attributes and effects).

^ Cf . David S. Tatel, Remarks, The Administrative Process and the Rule of Environmental Law , 34 Harv. Envtl. L. Rev. 1 (2010) (“As environmental lawyers well know, admin is where the action is.” Id . at 1.).

^ Pub. L. No. 79-404, 60 Stat. 237 (1946) (codified as amended in scattered sections of 5 U.S.C.); see Metzger, supra note 1, at 133.

^ See Pan, supra note 2, at 1931–32 (noting how financial regulators “still rely quite frequently on private regulatory strategies” as compared to the tools of public regulatory law, id . at 1931); Sidney A. Shapiro, Outsourcing Government Regulation , 53 Duke L.J . 389, 408–09 (2003).

^ John F. Coverdale, Chevron ’s Reduced Domain: Judicial Review of Treasury Regulations and Revenue Rulings After Mead, 55 Admin. L. Rev. 39, 84 (2003). Professor John Coverdale argues that Chevron ’s absence owes mostly to error. Yet Chevron is more than just a multistep dance; it incorporates a worldview centered on allocation of powers. See generally Thomas W. Merrill & Kristin E. Hickman, Chevron ’s Domain , 89 Geo. L.J . 833, 836 (2001). Because financial regulation blurs so many jurisdictional boundaries, it is perhaps unsurprising that Chevron , the classic reward for such clarity, proves so absent.

^ See 5 U.S.C. § 701(a)(2) (2012) (exempting from judicial review “agency action [that] is committed to agency discretion by law”).

^ See, e.g. , William M. Landes & Richard A. Posner, The Positive Economic Theory of Tort Law , 15 Ga. L. Rev. 851 (1981).

^ See Metzger, supra note 15, at 1312–13.

^ Wong Yang Sung v. McGrath, 339 U.S. 33, 40 (1950) (“The [APA] . . . enacts a formula upon which opposing social and political forces have come to rest.”).

^ See Cass R. Sunstein, What’s Standing After Lujan ? Of Citizen Suits, “Injuries,” and Article III , 91 Mich. L. Rev. 163, 220–23 (1992).

^ See Metzger, supra note 1, at 130–31. Of course, administrative law cares about results, but its deep fear is agency overreach, not that an optimal policy may slip away.

^ See id . at 142–44.

^ Cf . Pan, supra note 2, at 1933–34 (showing structural challenges of financial regulators).

^ See Adam J. Levitin, The Politics of Financial Regulation and the Regulation of Financial Politics: A Review Essay , 127 Harv. L. Rev. 1991, 2041–49 (2014) (book review) (sketching the worry about “feckless or even rogue regulators,” id . at 2042).

^ See Robert B. Ahdieh, Notes From Across the Border: Writing Across the Administrative Law/Financial Regulation Divide , 66 J. Legal Educ . 64, 68 (2016) (pointing out how few financial regulatory commentators use administrative law frameworks like “notice and comment”).

^ Zaring, supra note 4, at 208–09.

^ See Ahdieh, supra note 32, at 71–72.

^ See, e.g. , Daniel R. Ernst, Tocqueville’s Nightmare: The Administrative State Emerges in America , 1900–1940 (2014) (showing administrative law’s long history); Alejandro Komai & Gary Richardson, A Brief History of Regulations Regarding Financial Markets in the United States: 1789 to 2009 (Nat’l Bureau of Econ. Research, Working Paper No. 17443, 2011), http://www.nber.org/papers/w17443 [ https://perma.cc/82UU-TDN2 ] (same for financial regulation).

^ To be sure, the idea of a single moment of creation may obscure more than it inspires. Cf . Lars Noah, Interpreting Agency Enabling Acts: Misplaced Metaphors in Administrative Law , 41 Wm. & Mary L. Rev. 1463, 1466 (2000) (pointing to the “interpretive baggage” of enabling statutes).

^ Levitin, supra note 31, at 2039.

^ See, e.g. , Michael E. Parrish, The Great Depression, the New Deal, and the American Legal Order , 59 Wash. L. Rev. 723, 745–46 (1984); A.C. Pritchard & Robert B. Thompson, Securities Law and the New Deal Justices , 95 Va. L. Rev. 841, 846–49 (2009); Steven A. Ramirez, The Law and Macroeconomics of the New Deal at 70 , 62 Md. L. Rev. 515, 534–46 (2003).

^ See Joel Seligman , The Transformation of Wall Street 73–100 (3d ed. 2003).

^ See Pritchard & Thompson, supra note 39, at 890–92 (discussing N. Am. Co. v. SEC, 327 U.S. 686 (1946)); see also Seligman, supra note 40, at 127–53 (discussing the “imaginative and effective” activities, id . at 149).

^ See, e.g. , James J. Park, The Competing Paradigms of Securities Regulation , 57 Duke L.J . 625, 674 & n.198 (2007) (discussing the SEC’s broad discretion in choices of procedure).

^ See SEC v. Chenery Corp. ( Chenery II ), 332 U.S. 194, 204 (1947) (noting the SEC’s engagement with “particular facts in the case, its general experience in reorganization matters and its informed view of statutory requirements”); see also Pritchard & Thompson, supra note 39, at 902–07 (discussing Chenery II ).

^ Adrian Vermeule, Leviathan Had a Good War , Jotwell (Feb. 29, 2016), http://adlaw.jotwell.com/leviathan-had-a-good-war [ https://perma.cc/H5GX-Y7Z6 ] (viewing the APA as “in effect a treaty of peace”).

^ See Metzger, supra note 1, at 129.

^ See Charles H. Koch, Jr., James Landis: The Administrative Process , 48 Admin. L. Rev. 419, 425–28 (1996) (explaining Landis’s preference for administrative agencies over courts).

^ See id . at 421–25 (outlining Landis’s views).

^ Pritchard & Thompson, supra note 39, at 912.

^ See id . at 912–17.

^ See Ernst , supra note 36, at 129–32 (discussing Jerome Frank’s defense of the SEC).

^ See Ahdieh, supra note 32, at 66–67; see also Metzger, supra note 1, at 130–31.

^ See Koch, supra note 46, at 426 (noting Landis’s view of the superiority of the SEC process).

^ See Mark Tushnet, Lecture, Administrative Law in the 1930s: The Supreme Court’s Accommodation of Progressive Legal Theory , 60 Duke L.J . 1565, 1568–76 (2011).

^ See Lisa Schultz Bressman, Procedures as Politics in Administrative Law , 107 Colum. L. Rev. 1749, 1804–05 (2007) (seeing administrative law as “a bridge between law and politics,” id . at 1805); cf . Elena Kagan, Presidential Administration , 114 Harv. L. Rev. 2245 (2001) (arguing for political control).

^ See Zaring, supra note 4, at 209; see also Steven A. Ramirez, Depoliticizing Financial Regulation , 41 Wm. & Mary L. Rev. 503, 504–05 (2000) (“[I]f Congress provides broad delegation of authority to a singular agency with a high degree of political independence, then effective regulation is likely . . . .”).

^ See Levitin, supra note 31, at 2041–49.

^ Cf . Ramirez, supra note 55, at 583–84 (pointing to advantages of “power and flexibility,” id . at 584).

^ See David Zaring, Sovereignty Mismatch and the New Administrative Law , 91 Wash. U. L. Rev. 59, 61–64 (2013).

^ See id . at 84–90.

^ See id . at 101–05.

^ Compare Levitin, supra note 31, at 2038–39 (seeing 2008 as posing “a crisis of faith in the financial regulatory system and its underlying claims to technocratic or scientific expertise,” id . at 2039), with Brett McDonnell, Don’t Panic! Defending Cowardly Interventions During and After a Financial Crisis , 116 Penn St. L. Rev. 1 (2011) (acknowledging an increasingly “complex and diverse” financial system, id . at 18).

^ See Levitin, supra note 31, at 2041–42 (discussing industry capture).

^ See David Zaring, Litigating the Financial Crisis , 100 Va. L. Rev. 1405, 1420–34 (2014) (discussing failed challenges to government actions).

^ See generally Metzger, supra note 1.

^ See, e.g. , Gersen, supra note 7 (“[F]inancial reform statutes . . . paint on a working canvass [sic] of existing administrative law.” Id . at 734.).

^ Bus. Roundtable v. SEC, 647 F.3d 1144, 1146–48 (D.C. Cir. 2011).

^ 15 U.S.C. § 78n(a) (2012).

^ Bus. Roundtable , 647 F.3d at 1147.

^ Id . at 1146.

^ Id . at 1148–49.

^ Facilitating Shareholder Director Nominations, 74 Fed. Reg. 29,024, 29,025 (proposed June 18, 2009) (to be codified in scattered parts of 17 C.F.R.) (expressing those views).

^ 5 U.S.C. § 706(2)(A) (2012).

^ Bus. Roundtable , 647 F.3d at 1149–51.

^ Id . at 1148 (quoting Chamber of Commerce v. SEC, 412 F.3d 133, 144 (D.C. Cir. 2005)).

^ See, e.g. , Richard L. Revesz, Quantifying Regulatory Benefits , 102 Calif. L. Rev. 1423, 1430 (2014).

^ See, e.g. , James D. Cox & Benjamin J.C. Baucom, The Emperor Has No Clothes: Confronting the D.C. Circuit’s Usurpation of SEC Rulemaking Authority , 90 Tex. L. Rev. 1811, 1828 (2012) (critiquing a perceived end to deference by the D.C. Circuit); Jonathan D. Guynn, Note, The Political Economy of Financial Rulemaking After Business Roundtable, 99 Va. L. Rev. 641, 664–67 (2013) (arguing that Business Roundtable presents a new, nondeferential regime).

^ See Bus. Roundtable , 647 F.3d at 1151.

^ See Coates, supra note 10.

^ See id . at 998–1003.

^ Cf . Bruce Kraus & Connor Raso, Rational Boundaries for SEC Cost-Benefit Analysis , 30 Yale J. on Reg . 289, 335–36 (2013) (“Economic analysis should therefore inform, but should not be expected or allowed to dictate, policy.” Id . at 336). But see Cass R. Sunstein, Financial Regulation and Cost-Benefit Analysis , 124 Yale L.J.F . 263, 270 (2015) (arguing CBA is possible and desirable).

^ Cass R. Sunstein, Cost-Benefit Analysis and Arbitrariness Review 3–4 (Harvard Pub. Law Working Paper No. 16-12, 2016), http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2752068 [ https://perma.cc/Q8SV-7BTZ ] (explaining the “maximalist” view).

^ See Caroline Cecot & W. Kip Viscusi, Judicial Review of Agency Benefit-Cost Analysis , 22 Geo. Mason L. Rev. 575, 591 (2015).

^ Perhaps the strongest defense of the Business Roundtable court is a view that its objections are about pretext: concern that the SEC hadn’t taken its duties seriously at all. See Jill E. Fisch, The Long Road Back: Business Roundtable and the Future of SEC Rulemaking , 36 Seattle U. L. Rev. 695, 700–01 (2013).

^ See Coates, supra note 10, at 909–12.

^ Pub. L. No. 111-203, 124 Stat. 1376 (2010) (codified in scattered sections of the U.S. Code).

^ State Nat’l Bank of Big Spring v. Lew, 795 F.3d 48, 51–52 (D.C. Cir. 2015); see also 12 U.S.C. § 5384 (2012).

^ State Nat’l Bank , 795 F.3d at 52.

^ Id . at 55.

^ Id . at 56; see also id . (“State plaintiffs will be affected . . . only if a company in which they are invested is liquidated or reorganized by the Government, and only if the States are then treated differently from other similarly situated creditors.”).

^ Id . at 54 (citing Free Enter. Fund v. Pub. Co. Accounting Oversight Bd., 561 U.S. 477, 490 (2010)).

^ See generally Recent Case, supra note 13 (discussing State National Bank ).

^ See Coates, supra note 10, at 1002 (pointing to the “non-stationary” attributes of financial markets).

^ See Recent Case, supra note 13, at 840.

^ See Zaring, supra note 63, at 1431–34 (advocating for this approach).

^ See, e.g. , Carolyn Sissoko, Note, Is Financial Regulation Structurally Biased to Favor Deregulation? , 86 S. Cal. L. Rev. 365, 402–03 (2013).

^ See Mark J. Roe & Michael Tröge, Taxing Banks Properly: The Next Regulatory Frontier , at 11 (2016), http://web.law.columbia.edu/sites/default/files/microsites/law-economics-studies/taxingbanksproperly_feb_20_2016_v5.2.pdf [ https://perma.cc/5E5L-ZSNW ].

^ C.A. No. 15-0045, 2016 WL 1391569, at *1 (D.D.C. Mar. 30, 2016).

^ See id . at *14–15.

^ Id . at *17.

^ 135 S. Ct. 2699 (2015).

^ 531 U.S. 457 (2001).

^ Metlife , 2016 WL 1391569, at *15–16.

^ Id . at *15.

^ See id . at *15–16.

^ See Bus. Roundtable v. SEC, 647 F.3d 1144, 1148–51 (D.C. Cir. 2011) (setting out specific factors the agency should have considered in its CBA).

^ Metlife , 2016 WL 1391569, at *15–17.

^ See Steven L. Schwarcz, Regulating Financial Change: A Functional Approach , 100 Minn. L. Rev. 1441, 1463–69 (2016) (noting and critiquing the historically ad hoc approach to regulation in the financial context).

^ See Ahdieh, supra note 32, at 73–74.

^ See Zaring, supra note 6, at 544–46 (developing that sensibility).

^ See Coates, supra note 10, at 1011.

^ See Ramirez, supra note 55, at 527–28.

^ See generally Robert G. Kaiser , Act of Congress (2013) (discussing Dodd-Frank).

^ See Barr, supra note 3, at 123 (“FSOC’s authorities fill important gaps in the system and help to reduce the risk of regulatory arbitrage.”).

^ See, e.g. , Merrill & Merrill, supra note 8, at 172.

^ See Gersen, supra note 7, at 691–92 (outlining the point).

^ See Metzger, supra note 1, at 145–46 (arguing that Dodd-Frank shows how “that divide [between financial regulation and administrative law] is now collapsing”).

^ See Sunstein, supra note 82 (manuscript at 5–8) (developing the argument from a social welfare perspective).

^ See Kagan, supra note 54, at 2266–67 (discussing contemporary fears of regulatory slowdown).

^ See Fisch, supra note 84, at 700–01.

^ Lisa Heinzerling, The Power Canons , 58 Wm. & Mary L. Rev. (forthcoming 2017) (manuscript at 23–25), https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2757770 [ https://perma.cc/MXG2-K34B ]. Of course, the underlying administrative law has also undergone substantive evolutions. See, e.g. , The Supreme Court, 2014 Term — Leading Cases , 129 Harv. L. Rev. 181, 317–26 (2015).

^ Sunstein, supra note 81, at 275.

^ See Motor Vehicle Mfrs. Ass’n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29 (1983); Stephen Breyer, Judicial Review of Questions of Law and Policy , 38 Admin. L. Rev. 363, 388–94 (1986). But see Gersen & Vermeule, supra note 11 (arguing that current law shows little evidence of hard look review).

^ See Cass R. Sunstein & Adrian Vermeule, Libertarian Administrative Law , 82 U. Chi. L. Rev. 393, 450 (2015).

^ See Donald C. Langevoort, Theories, Assumptions, and Securities Regulation: Market Efficiency Revisited , 140 U. Pa. L. Rev. 851, 851 (1992).

^ See Recent Case, supra note 13, at 840–41.

^ See Barr, supra note 3, at 123.

^ See Breyer, supra note 124, at 363.

^ See Thomas W. Merrill, Step Zero After City of Arlington, 83 Fordham L. Rev. 753, 754–55 (2014) (discussing “the traditional judicial function of boundary maintenance,” id . at 755).

^ See, e.g. , Merrill & Merrill, supra note 8. To take the most visible example, a number of recent cases have involved questions about the scope of the CFPB’s authority. See CFPB v. Accrediting Council for Indep. Colls. & Sch., No. 15-1838, 2016 WL 1625084, at *2–4 (D.D.C. Apr. 21, 2016); CFPB v. Mortg. Law Grp., LLP, 157 F. Supp. 3d 813, 819–21 (W.D. Wis. 2016); CFPB v. ITT Educ. Servs., Inc., No. 1:14-CV-00292, 2015 WL 1013508, at *21–24 (S.D. Ind. Mar. 6, 2015).

^ See Merrill, supra note 130, at 757.

^ See Jacob E. Gersen, Overlapping and Underlapping Jurisdiction in Administrative Law , 2006 Sup. Ct. Rev. 201, 216–19. But see The Supreme Court, 2015 Term — Leading Cases , 130 Harv. L. Rev. 307, 447–56 (2016).

^ See Jon D. Michaels, An Enduring, Evolving Separation of Powers , 115 Colum. L. Rev. 515, 530–31 (2015).

^ 839 F.3d 1 (D.C. Cir. 2016).

^ Id . at 8; id . at 34.

^ Id . at 37–39.

^ See Adrian Vermeule, Essay, Deference and Due Process , 129 Harv. L. Rev. 1890, 1916 (2016).

^ See Revesz, supra note 76, at 1430.

^ Cf . Balt. Gas & Elec. Co. v. Nat. Res. Def. Council, Inc., 462 U.S. 87, 97–98 (1983) (“The role of the courts is simply to ensure that the agency has adequately considered and disclosed the . . . impact of its actions . . . .”).

^ Chevron U.S.A. Inc. v. Nat. Res. Def. Council, Inc., 467 U.S. 837, 864 (1984).

^ Cf . Vermeule, supra note 138, at 1916.

^ See State Nat’l Bank of Big Spring v. Lew, 795 F.3d 48, 56 (D.C. Cir. 2015).

^ Cf . Ronald M. Levin, Administrative Procedure and Judicial Restraint , 129 Harv. L. Rev. F . 338 (2016).

• Administrative Law
• Financial Regulation

February 10, 2017

More from this Issue

Restoring legitimacy: the grand jury as the prosecutor’s administrative agency, the rise of purposivism and the fall of chevron : major statutory cases in the supreme court, in re al-nashiri.

D.C. Circuit Abstains from Adjudicating Habeas Petition of Guantanamo Detainee Tried by Military Commission.

Case Study for the Regulation of Financial Institutions

Law students present a case study to their peers, simulating real-world cases young lawyers might face..

Introduction: This series of case studies is used to teach Regulation of Financial Institutions. It is designed to give students practical experience, and as such qualifies as experiential-learning credit under recently established American Bar Association requirements. Case materials can be found here . 

Goals: The learning goals of using the case studies in this course were to:

(1) give students a deeper look into some emerging and contested area of financial regulation

(2) provide students an opportunity to dig into statutory and regulatory materials that are summarized in more general terms in an accompanying textbook

(3) introduce students to the kind of work that they might actually be expected to do as young attorneys

Procedure - Before Class: Students are broken into small teams of two or three and each group is assigned one case to present during the semester. They are instructed to create a PowerPoint to help lead the discussion and are given a maximum slide limit. To prepare this presentation, students must read the full set of material associated with that case (a memorandum (~20 pages) and any additional files (~100 pages). Other students who are not leading the case that week are instructed to read the memorandum only.

Procedure - During Class: During class, the students present their presentation and field questions from their classmates. The team leads the class through a discussion on topical issues in financial law that they could be faced with as a young lawyer in private practice, government work, or other fields of financial law. This allows the law students to get practical exposure to a variety of types of law and qualifies as experiential-learning credit under recently established American Bar Association requirements. After the presentation the class votes on the course of best action.

Procedure - After Class: After the discussion and voting, Professor Jackson summarizes the key points from the discussion. Additionally, the instructor promptly gives feedback to the students that presented after class on both their analysis as well as their presentation/communication.

Materials – Preparation of Case Studies: Born from a collaboration with Professor Peter Tufano (then of Harvard Buisness School), Professor Jackson and his colleague Meg Tahyar have created a series of Financial Law Case studies available online. To create these cases, Professor Jackson turned to real cases he encountered in practice. He emphasizes that having real and relevant material for a case is essential to peak student’s enthusiasm. After designing a case, he tests it with students and iteratively improves/clarifies the case over several years. This refinement process is important to ensure clarity in the case and to make sure that the key takeaways are highlighted effectively. Click here for access to the case studies:    https://h2o.law.harvard.edu/playlists/27055  

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Customer Case Study: Meeting Regulatory Obligations around risk management, governance and internal controls in Banking

Business Services November 12, 2024

Table of contents

🗨️ Discover the full case study

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A leading global bank uses Dassault Systèmes’ solution to standardize data models, improve data governance and internal controls to meet the regulatory data governance requirements.

As global regulators ramp up demands for financial services companies to achieve operational resilience —requiring uninterrupted performance of essential business functions even during disruptions—financial institutions are increasingly seeking innovative solutions to meet these critical standards.

In a recent example, one of our banking customers successfully standardized its entire, complex operational systems and applied this approach across all essential business services, achieving consistency and operational efficiency organization-wide.

Here are some of the transformative benefits they experienced:

• Advanced-Data Modeling Capabilities

Unified Modeling Language (UML) and Systems Modeling Language (SysML) enable the bank to create detailed, standardized models that are easily understandable across teams and stakeholders.

By leveraging Logical and Physical Data Models , teams can design abstract data representations and seamlessly translate them into physical database structures, ensuring clarity and functionality from concept to execution.

• Seamless Data Integration and Interoperability.

Integrating various data models and sources into a cohesive architecture has allowed the bank to unify data from diverse departments and systems, whether from existing frameworks or new workflows.

This streamlined data flow minimizes disruptions and maintains data consistency across the organization, ensuring teams using different tools and platforms can easily access accurate information.

• Compliance and Data Governance

Robust traceability and auditability features allow the bank to track data model changes and maintain compliance with both internal policies and external regulations, including GDPR, DORA, and BCB 29 .

With detailed data lineage , the bank can track the origin, transformation, and end-use of data, which improves transparency and meets regulatory requirements related to data usage and management.

• Collaboration and Model Sharing

Multiple users from different regions and time zones can now work on the same models simultaneously, promoting efficient collaboration and enabling model sharing and reuse.

A centralized library of standardized models reduces redundancy and ensures that consistent methodologies are applied across various projects and services.

• Comprehensive Visualization and Reporting

The bank’s Information Architecture team can leverage advanced visualization tools to create detailed and intuitive diagrams that represent complex data structures and relationships, making it easier to communicate data architecture details to non-technical stakeholders and facilitate informed decision-making.

Automated reporting capabilities allow for streamlined generation of documentation, which supports regulatory submissions and simplifies internal review processes.

• Simulation & Validation of Data models

Before implementation, data models undergo simulation and validation before implementation, ensuring they are logically sound and error-free. This proactive approach reduces the risks of issues arising during deployment, safeguarding operational continuity.

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Regulatory Compliance Examples: 5 Illustrative Case Studies

By Emily Fenton

Updated February 27, 2023

Regulatory Compliance Examples: 5 Important Regulatory Frameworks

A regulatory framework is a model used for proposing, enacting and reforming regulations in an effective and logical way. Policymakers develop frameworks in a specific area of interest, or use a current framework to work on a new regulatory project.

Regulatory frameworks help protect consumers, and ensure businesses are run properly. But even if you’re dedicated to ensuring your company follows all regulatory frameworks to the letter, keeping up with every regulatory change likely feels futile.

Visualping can be a lifesaver. This easy-to-use yet powerful tool monitors regulatory websites so you don’t have to, sending you notifications whenever changes are detected.

You can use Visualping to follow all relevant legislative activity, and subsequent regulatory updates, to keep your company running smoothly and violation-free. Here are some major regulatory compliance examples your company may need to track.

The General Data Protection Regulation (GDPR)

The General Data Protection Regulation ( GDPR ) law was enacted in the European Union in May 2018. It's a privacy law that outlines safety standards for storing user or customer details online. Those details include an individual user’s IP address, device ID, home address, etc.

It impacts all companies conducting business in Europe. Even if your company isn’t based in the E.U., you’re still legally bound by the GDPR regarding European users’ information.

GDPR Regulatory Updates

GDPR is not set in stone — it hasn’t actually stood still since it took effect in 2018. The E.U. updates the GDPR with key developments that evolve over time, and which impact companies inside and outside the EU.

One example goes back to May 2020, when the E.U. updated its GDPR guidance to clarify several points, such as on the use of cookie walls: the GDPR clarified that cookie walls do not offer users a genuine choice, and so they can't be used as a formal request for user data. Nor does scrolling or swiping through ewb content equate to implied consent -- the E.U. reiterated that consent must be explicit.

Changes to GDPR happen all the time and, if they impact your business, then you'll need to know. In order to companies to stay compliant, then monitoring GDPR for updates is critical in limiting compliance risk.

Even accidental oversights can result in companies facing steep fines for GDPR violations. In fact, by early 2021, the E.U. had already assessed more than $332 million in fines!

When a business is facing a GDPR fine, ten factors are used to determine the amount:

• How serious is the violation?
• Was it an intentional violation or due to negligence?
• Did the organization immediately take action to correct the mistake?
• Did the organization have precautionary measures in place to prevent GDPR violations (like clear compliance regulations)?
• Is there a history of noncompliance?
• Did the organization cooperate with authorities?
• How sensitive is the affected data?
• Did the organization notify authorities of the violation on its own?
• Does the organization already have GDPR certifications?
• Are there other mitigating or aggravating factors to be considered?

Since expectations of the GDPR are subject to change over time, and considering even accidental violations can have serious consequences, it’s imperative to monitor regulatory changes from frameworks like the GDPR and CCPA, and others like it.

The California Consumer Privacy Act (CCPA)

In the age of big data, businesses are collecting more and more information on their consumers. The California Consumer Privacy Act ( CCPA ), a law that went into effect in January 2020, helps consumers understand and control the data about them that are being collected.

Under the CCPA, consumers have the right to know what data a given company collects and remove any publicly posted information. Perhaps most importantly, consumers can also opt out of having their personal information shared or sold. The law prohibits businesses from discriminating against customers who opt out.

Unlike GDPR, the CCPA only applies to commercial companies:

• Who process the data of more than 50,000 California residents a year, OR
• Who generate gross revenue of more than $25m a year, OR
• Who make more than half of their annual revenue from selling California residents’ personal data

CCPA Regulatory Updates

Like the GDPR, the CCPA is also subject to change over time. The designated regulator for enforcing the CCPA issued a notice of new regulations in July 2022, to take effect Jan. 2023. While these changes reflected incremental amendments to the existing CCPA, the updates still significantly impacted the handling of information for some companies.

For example, new regulations for data minimization required that the “collection, use, retention, and/or sharing" of private consumer data should only be "reasonably necessary and proportionate to achieve the purpose(s) for which the personal information was collected or processed.” It goes further to define “necessary and proportionate” in this context as being “what an average consumer would expect” at the time of collection.

The CCPA also gives consumers recourse in the event of a data breach or unlawful sale of information.

If the stolen or leaked data includes Social Security numbers, government-issued ID numbers, financial account numbers, HIPAA-protected health information, or biometric data, consumers may bring a lawsuit against the company that failed to protect the data.

The Payment Card Industry Data Security Standard (PCI DSS)

It’s all too easy for hackers to steal sensitive data if credit and debit card numbers aren’t adequately protected online.

Much like banking regulatory compliance standards, there’s also a regulatory compliance framework for online merchants. The PCI DSS aims to ensure that every company that accepts online card payments processes and stores data securely.

To comply with the law, these companies must use a PCI-compliant provider to store and handle payment data. A PCI-compliant provider follows these 12 critical guidelines:

• Have a working firewall
• Change any default passwords or security settings
• Protect all stored data
• Encrypt data if it’s being transmitted via a public network
• Maintain working antivirus software
• Have clear security systems and processes to address vulnerabilities
• Restrict access to customer data to only employees who need to know
• Give every employee with computer access a unique ID
• Limit any kind of physical access to customer data
• Track who accesses customer data
• Conduct regular process and system testing
• Have a set, written policy for information security

The PCI DSS isn’t a law. However, payment and merchant service providers often require businesses to be PCI-compliant as part of their contracts. If a business becomes noncompliant, it may face considerable fines.

If you handle any type of online payment, you’ll need to make sure your internal regulatory compliance policy is in line with PCI DSS.

The Health Insurance Portability and Accountability Act (HIPAA)

HIPAA is probably one of the best-known compliance frameworks. It’s designed to protect data collected in healthcare and medical settings. For businesses in the healthcare sector, maintaining HIPAA compliance is vitally important.

Most healthcare data is stored electronically, and part of HIPAA compliance is protecting electronically-stored data from would-be hackers.

If your business is in the healthcare industry, you should have a robust data protection protocol and confirm that you’re fully compliant with any IT security guidelines. Make sure you have a compliance monitoring guide covering hard copies and electronic data.

The Sarbanes-Oxley Act (SOX)

First introduced in 2002, the Sarbanes-Oxley Act is one of the oldest regulatory frameworks in existence. It was passed to help prevent financial fraud by corporations. It accomplished this by strengthening regulations on transparency in corporate accounting and implementing new regulatory and compliance requirements.

One key aspect of SOX is that it establishes standards to ensure that external auditors have no conflicts of interest with the company being audited. The law also requires all public businesses to store records and messages for at least five years.

How to Use Visualping to Keep on Top of Legislative and Regulatory Changes

Not all of the above examples will apply to your business. But once you’ve gathered a list of websites you do need to monitor, you can get started using Visualping . Here’s a quick guide.

Step 1: Copy the URL of the Law or Regulation from Where It’s Published Online, Then Paste It into the Search Field on Visualping’s Homepage

This part is important, as you want to be sure you’re following the right webpage. Copying and pasting directly is the best way to avoid URL errors.

Step 2: Select the Part of the Page You Want Visualping to Monitor for Changes

Use your cursor to select the area of the page you want to monitor for changes. For example, if you’re using monitoring tools for law firms , you might highlight a portion of the state or local code to follow. You also can select whether you want Visualping to look for changes in the text, visual elements, or both.

Step 3: Choose the Frequency of Monitoring

Next, decide how often you want the platform to scan your website of choice. You can have Visualping perform daily, weekly, or monthly checks with a free plan. With an upgraded plan, you can have the platform run a scan as often as every five minutes.

Step 4: Enter the Email Address Where You Want to Receive Alerts

Make sure you provide an email address you check regularly. That way, you’ll be able to take action quickly if there’s a major regulatory change.

Step 5: Check Your Email to Complete the Signup Process

Once you’ve linked your email to Visualping, all you need to do is click the confirmation link in the automatically generated email you receive and you’ll be ready to go!

Keep Track of Regulatory Compliance Standards with Visualping

With Visualping, you can be confident that you’ll know about crucial regulatory changes as soon as they happen. Whether you’re keeping up with the rigors of pharmaceutical regulatory compliance , tracking legislation changes in the financial sector, or staying current on something else, we can help.

Visualping is simple and intuitive, and you can get started in minutes. Try it today for free!

Want to monitor web changes that impact your business?

Sign up with Visualping to get alerted of important updates, from anywhere online.

Emily Fenton

Emily is the Product Marketing Manager at Visualping. She has a degree in English Literature and a Masters in Management. When she’s not researching and writing about all things Visualping, she loves exploring new restaurants, playing guitar and petting her cats

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Family Relationships and Well-Being

Patricia a thomas , phd, hui liu , phd, debra umberson , phd.

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Address correspondence to: Patricia A. Thomas, PhD, Department of Sociology, Purdue University, 700 W. State Street, West Lafayette, IN 47907. E-mail: [email protected]

Collection date 2017 Nov.

This is an Open Access article distributed under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs licence ( http://creativecommons.org/licenses/by-nc-nd/4.0/ ), which permits non-commercial reproduction and distribution of the work, in any medium, provided the original work is not altered or transformed in any way, and that the work is properly cited. For commercial re-use, please contact [email protected]

Family relationships are enduring and consequential for well-being across the life course. We discuss several types of family relationships—marital, intergenerational, and sibling ties—that have an important influence on well-being. We highlight the quality of family relationships as well as diversity of family relationships in explaining their impact on well-being across the adult life course. We discuss directions for future research, such as better understanding the complexities of these relationships with greater attention to diverse family structures, unexpected benefits of relationship strain, and unique intersections of social statuses.

Keywords: Caregiver stress, Gender issues, Intergenerational, Social support, Well-being

Translational Significance

It is important for future research and health promotion policies to take into account complexities in family relationships, paying attention to family context, diversity of family structures, relationship quality, and intersections of social statuses in an aging society to provide resources to families to reduce caregiving burdens and benefit health and well-being.

For better and for worse, family relationships play a central role in shaping an individual’s well-being across the life course ( Merz, Consedine, Schulze, & Schuengel, 2009 ). An aging population and concomitant age-related disease underlies an emergent need to better understand factors that contribute to health and well-being among the increasing numbers of older adults in the United States. Family relationships may become even more important to well-being as individuals age, needs for caregiving increase, and social ties in other domains such as the workplace become less central in their lives ( Milkie, Bierman, & Schieman, 2008 ). In this review, we consider key family relationships in adulthood—marital, parent–child, grandparent, and sibling relationships—and their impact on well-being across the adult life course.

We begin with an overview of theoretical explanations that point to the primary pathways and mechanisms through which family relationships influence well-being, and then we describe how each type of family relationship is associated with well-being, and how these patterns unfold over the adult life course. In this article, we use a broad definition of well-being, including multiple dimensions such as general happiness, life satisfaction, and good mental and physical health, to reflect the breadth of this concept’s use in the literature. We explore important directions for future research, emphasizing the need for research that takes into account the complexity of relationships, diverse family structures, and intersections of structural locations.

Pathways Linking Family Relationships to Well-Being

A life course perspective draws attention to the importance of linked lives, or interdependence within relationships, across the life course ( Elder, Johnson, & Crosnoe, 2003 ). Family members are linked in important ways through each stage of life, and these relationships are an important source of social connection and social influence for individuals throughout their lives ( Umberson, Crosnoe, & Reczek, 2010 ). Substantial evidence consistently shows that social relationships can profoundly influence well-being across the life course ( Umberson & Montez, 2010 ). Family connections can provide a greater sense of meaning and purpose as well as social and tangible resources that benefit well-being ( Hartwell & Benson, 2007 ; Kawachi & Berkman, 2001 ).

The quality of family relationships, including social support (e.g., providing love, advice, and care) and strain (e.g., arguments, being critical, making too many demands), can influence well-being through psychosocial, behavioral, and physiological pathways. Stressors and social support are core components of stress process theory ( Pearlin, 1999 ), which argues that stress can undermine mental health while social support may serve as a protective resource. Prior studies clearly show that stress undermines health and well-being ( Thoits, 2010 ), and strains in relationships with family members are an especially salient type of stress. Social support may provide a resource for coping that dulls the detrimental impact of stressors on well-being ( Thoits, 2010 ), and support may also promote well-being through increased self-esteem, which involves more positive views of oneself ( Fukukawa et al., 2000 ). Those receiving support from their family members may feel a greater sense of self-worth, and this enhanced self-esteem may be a psychological resource, encouraging optimism, positive affect, and better mental health ( Symister & Friend, 2003 ). Family members may also regulate each other’s behaviors (i.e., social control) and provide information and encouragement to behave in healthier ways and to more effectively utilize health care services ( Cohen, 2004 ; Reczek, Thomeer, Lodge, Umberson, & Underhill, 2014 ), but stress in relationships may also lead to health-compromising behaviors as coping mechanisms to deal with stress ( Ng & Jeffery, 2003 ). The stress of relationship strain can result in physiological processes that impair immune function, affect the cardiovascular system, and increase risk for depression ( Graham, Christian, & Kiecolt-Glaser, 2006 ; Kiecolt-Glaser & Newton, 2001 ), whereas positive relationships are associated with lower allostatic load (i.e., “wear and tear” on the body accumulating from stress) ( Seeman, Singer, Ryff, Love, & Levy-Storms, 2002 ). Clearly, the quality of family relationships can have considerable consequences for well-being.

Marital Relationships

A life course perspective has posited marital relationships as one of the most important relationships that define life context and in turn affect individuals’ well-being throughout adulthood ( Umberson & Montez, 2010 ). Being married, especially happily married, is associated with better mental and physical health ( Carr & Springer, 2010 ; Umberson, Williams, & Thomeer, 2013 ), and the strength of the marital effect on health is comparable to that of other traditional risk factors such as smoking and obesity ( Sbarra, 2009 ). Although some studies emphasize the possibility of selection effects, suggesting that individuals in better health are more likely to be married ( Lipowicz, 2014 ), most researchers emphasize two theoretical models to explain why marital relationships shape well-being: the marital resource model and the stress model ( Waite & Gallager, 2000 ; Williams & Umberson, 2004 ). The marital resource model suggests that marriage promotes well-being through increased access to economic, social, and health-promoting resources ( Rendall, Weden, Favreault, & Waldron, 2011 ; Umberson et al., 2013 ). The stress model suggests that negative aspects of marital relationships such as marital strain and marital dissolutions create stress and undermine well-being ( Williams & Umberson, 2004 ), whereas positive aspects of marital relationships may prompt social support, enhance self-esteem, and promote healthier behaviors in general and in coping with stress ( Reczek, Thomeer, et al., 2014 ; Symister & Friend, 2003 ; Waite & Gallager, 2000 ). Marital relationships also tend to become more salient with advancing age, as other social relationships such as those with family members, friends, and neighbors are often lost due to geographic relocation and death in the later part of the life course ( Liu & Waite, 2014 ).

Married people, on average, enjoy better mental health, physical health, and longer life expectancy than divorced/separated, widowed, and never-married people ( Hughes & Waite, 2009 ; Simon, 2002 ), although the health gap between the married and never married has decreased in the past few decades ( Liu & Umberson, 2008 ). Moreover, marital links to well-being depend on the quality of the relationship; those in distressed marriages are more likely to report depressive symptoms and poorer health than those in happy marriages ( Donoho, Crimmins, & Seeman, 2013 ; Liu & Waite, 2014 ; Umberson, Williams, Powers, Liu, & Needham, 2006 ), whereas a happy marriage may buffer the effects of stress via greater access to emotional support ( Williams, 2003 ). A number of studies suggest that the negative aspects of close relationships have a stronger impact on well-being than the positive aspects of relationships (e.g., Rook, 2014 ), and past research shows that the impact of marital strain on health increases with advancing age ( Liu & Waite, 2014 ; Umberson et al., 2006 ).

Prior studies suggest that marital transitions, either into or out of marriage, shape life context and affect well-being ( Williams & Umberson, 2004 ). National longitudinal studies provide evidence that past experiences of divorce and widowhood are associated with increased risk of heart disease in later life especially among women, irrespective of current marital status ( Zhang & Hayward, 2006 ), and longer duration of divorce or widowhood is associated with a greater number of chronic conditions and mobility limitations ( Hughes & Waite, 2009 ; Lorenz, Wickrama, Conger, & Elder, 2006 ) but only short-term declines in mental health ( Lee & Demaris, 2007 ). On the other hand, entry into marriages, especially first marriages, improves psychological well-being and decreases depression ( Frech & Williams, 2007 ; Musick & Bumpass, 2012 ), although the benefits of remarriage may not be as large as those that accompany a first marriage ( Hughes & Waite, 2009 ). Taken together, these studies show the importance of understanding the lifelong cumulative impact of marital status and marital transitions.

Gender Differences

Gender is a central focus of research on marital relationships and well-being and an important determinant of life course experiences ( Bernard, 1972 ; Liu & Waite, 2014 ; Zhang & Hayward, 2006 ). A long-observed pattern is that men receive more physical health benefits from marriage than women, and women are more psychologically and physiologically vulnerable to marital stress than men ( Kiecolt-Glaser & Newton, 2001 ; Revenson et al., 2016 ; Simon, 2002 ; Williams, 2004 ). Women tend to receive more financial benefits from their typically higher-earning male spouse than do men, but men generally receive more health promotion benefits such as emotional support and regulation of health behaviors from marriage than do women ( Liu & Umberson, 2008 ; Liu & Waite, 2014 ). This is because within a traditional marriage, women tend to take more responsibility for maintaining social connections to family and friends, and are more likely to provide emotional support to their husband, whereas men are more likely to receive emotional support and enjoy the benefit of expanded social networks—all factors that may promote husbands’ health and well-being ( Revenson et al., 2016 ).

However, there is mixed evidence regarding whether men’s or women’s well-being is more affected by marriage. On the one hand, a number of studies have documented that marital status differences in both mental and physical health are greater for men than women ( Liu & Umberson, 2008 ; Sbarra, 2009 ). For example, Williams and Umberson (2004) found that men’s health improves more than women’s from entering marriage. On the other hand, a number of studies reveal stronger effects of marital strain on women’s health than men’s including more depressive symptoms, increases in cardiovascular health risk, and changes in hormones ( Kiecolt-Glaser & Newton, 2001 ; Liu & Waite, 2014 ; Liu, Waite, & Shen, 2016 ). Yet, other studies found no gender differences in marriage and health links (e.g., Umberson et al., 2006 ). The mixed evidence regarding gender differences in the impact of marital relationships on well-being may be attributed to different study samples (e.g., with different age groups) and variations in measurements and methodologies. More research based on representative longitudinal samples is clearly warranted to contribute to this line of investigation.

Race-Ethnicity and SES Heterogeneity

Family scholars argue that marriage has different meanings and dynamics across socioeconomic status (SES) and racial-ethnic groups due to varying social, economic, historical, and cultural contexts. Therefore, marriage may be associated with well-being in different ways across these groups. For example, women who are black or lower SES may be less likely than their white, higher SES counterparts to increase their financial capital from relationship unions because eligible men in their social networks are more socioeconomically challenged ( Edin & Kefalas, 2005 ). Some studies also find that marital quality is lower among low SES and black couples than white couples with higher SES ( Broman, 2005 ). This may occur because the former groups face more stress in their daily lives throughout the life course and these higher levels of stress undermine marital quality ( Umberson, Williams, Thomas, Liu, & Thomeer, 2014 ). Other studies, however, suggest stronger effects of marriage on the well-being of black adults than white adults. For example, black older adults seem to benefit more from marriage than older whites in terms of chronic conditions and disability ( Pienta, Hayward, & Jenkins, 2000 ).

Directions for Future Research

The rapid aging of the U.S. population along with significant changes in marriage and families indicate that a growing number of older adults enter late life with both complex marital histories and great heterogeneity in their relationships. While most research to date focuses on different-sex marriages, a growing body of research has started to examine whether the marital advantage in health and well-being is extended to same-sex couples, which represents a growing segment of relationship types among older couples ( Denney, Gorman, & Barrera, 2013 ; Goldsen et al., 2017 ; Liu, Reczek, & Brown, 2013 ; Reczek, Liu, & Spiker, 2014 ). Evidence shows that same-sex cohabiting couples report worse health than different-sex married couples ( Denney et al., 2013 ; Liu et al., 2013 ), but same-sex married couples are often not significantly different from or are even better off than different-sex married couples in other outcomes such as alcohol use ( Reczek, Liu, et al., 2014 ) and care from their partner during periods of illness ( Umberson, Thomeer, Reczek, & Donnelly, 2016 ). These results suggest that marriage may promote the well-being of same-sex couples, perhaps even more so than for different-sex couples ( Umberson et al., 2016 ). Including same-sex couples in future work on marriage and well-being will garner unique insights into gender differences in marital dynamics that have long been taken for granted based on studies of different-sex couples ( Umberson, Thomeer, Kroeger, Lodge, & Xu, 2015 ). Moreover, future work on same-sex and different-sex couples should take into account the intersection of other statuses such as race-ethnicity and SES to better understand the impact of marital relationships on well-being.

Another avenue for future research involves investigating complexities of marital strain effects on well-being. Some recent studies among older adults suggest that relationship strain may actually benefit certain dimensions of well-being. These studies suggest that strain with a spouse may be protective for certain health outcomes including cognitive decline ( Xu, Thomas, & Umberson, 2016 ) and diabetes control ( Liu et al., 2016 ), while support may not be, especially for men ( Carr, Cornman, & Freedman, 2016 ). Explanations for these unexpected findings among older adults are not fully understood. Family and health scholars suggest that spouses may prod their significant others to engage in more health-promoting behaviors ( Umberson, Crosnoe, et al., 2010 ). These attempts may be a source of friction, creating strain in the relationship; however, this dynamic may still contribute to better health outcomes for older adults. Future research should explore the processes by which strain may have a positive influence on health and well-being, perhaps differently by gender.

Intergenerational Relationships

Children and parents tend to remain closely connected to each other across the life course, and it is well-established that the quality of intergenerational relationships is central to the well-being of both generations ( Merz, Schuengel, & Schulze, 2009 ; Polenick, DePasquale, Eggebeen, Zarit, & Fingerman, 2016 ). Recent research also points to the importance of relationships with grandchildren for aging adults ( Mahne & Huxhold, 2015 ). We focus here on the well-being of parents, adult children, and grandparents. Parents, grandparents, and children often provide care for each other at different points in the life course, which can contribute to social support, stress, and social control mechanisms that influence the health and well-being of each in important ways over the life course ( Nomaguchi & Milkie, 2003 ; Pinquart & Soerensen, 2007 ; Reczek, Thomeer, et al., 2014 ).

Family scholarship highlights the complexities of parent–child relationships, finding that parenthood generates both rewards and stressors, with important implications for well-being ( Nomaguchi & Milkie, 2003 ; Umberson, Pudrovska, & Reczek, 2010 ). Parenthood increases time constraints, producing stress and diminishing well-being, especially when children are younger ( Nomaguchi, Milkie, & Bianchi, 2005 ), but parenthood can also increase social integration, leading to greater emotional support and a sense of belonging and meaning ( Berkman, Glass, Brissette, & Seeman, 2000 ), with positive consequences for well-being. Studies show that adult children play a pivotal role in the social networks of their parents across the life course ( Umberson, Pudrovska, et al., 2010 ), and the effects of parenthood on health and well-being become increasingly important at older ages as adult children provide one of the major sources of care for aging adults ( Seltzer & Bianchi, 2013 ). Norms of filial obligation of adult children to care for parents may be a form of social capital to be accessed by parents when their needs arise ( Silverstein, Gans, & Yang, 2006 ).

Although the general pattern is that receiving support from adult children is beneficial for parents’ well-being ( Merz, Schulze, & Schuengel, 2010 ), there is also evidence showing that receiving social support from adult children is related to lower well-being among older adults, suggesting that challenges to an identity of independence and usefulness may offset some of the benefits of receiving support ( Merz et al., 2010 ; Thomas, 2010 ). Contrary to popular thought, older parents are also very likely to provide instrumental/financial support to their adult children, typically contributing more than they receive ( Grundy, 2005 ), and providing emotional support to their adult children is related to higher well-being for older adults ( Thomas, 2010 ). In addition, consistent with the tenets of stress process theory, most evidence points to poor quality relationships with adult children as detrimental to parents’ well-being ( Koropeckyj-Cox, 2002 ; Polenick et al., 2016 ); however, a recent study found that strain with adult children is related to better cognitive health among older parents, especially fathers ( Thomas & Umberson, 2017 ).

Adult Children

As children and parents age, the nature of the parent–child relationship often changes such that adult children may take on a caregiving role for their older parents ( Pinquart & Soerensen, 2007 ). Adult children often experience competing pressures of employment, taking care of their own children, and providing care for older parents ( Evans et al., 2016 ). Support and strain from intergenerational ties during this stressful time of balancing family roles and work obligations may be particularly important for the mental health of adults in midlife ( Thomas, 2016 ). Most evidence suggests that caregiving for parents is related to lower well-being for adult children, including more negative affect and greater stress response in terms of overall output of daily cortisol ( Bangerter et al., 2017 ); however, some studies suggest that caregiving may be beneficial or neutral for well-being ( Merz et al., 2010 ). Family scholars suggest that this discrepancy may be due to varying types of caregiving and relationship quality. For example, providing emotional support to parents can increase well-being, but providing instrumental support does not unless the caregiver is emotionally engaged ( Morelli, Lee, Arnn, & Zaki, 2015 ). Moreover, the quality of the adult child-parent relationship may matter more for the well-being of adult children than does the caregiving they provide ( Merz, Schuengel, et al., 2009 ).

Although caregiving is a critical issue, adult children generally experience many years with parents in good health ( Settersten, 2007 ), and relationship quality and support exchanges have important implications for well-being beyond caregiving roles. The preponderance of research suggests that most adults feel emotionally close to their parents, and emotional support such as encouragement, companionship, and serving as a confidant is commonly exchanged in both directions ( Swartz, 2009 ). Intergenerational support exchanges often flow across generations or towards adult children rather than towards parents. For example, adult children are more likely to receive financial support from parents than vice versa until parents are very old ( Grundy, 2005 ). Intergenerational support exchanges are integral to the lives of both parents and adult children, both in times of need and in daily life.

Grandparents

Over 65 million Americans are grandparents ( Ellis & Simmons, 2014 ), 10% of children lived with at least one grandparent in 2012 ( Dunifon, Ziol-Guest, & Kopko, 2014 ), and a growing number of American families rely on grandparents as a source of support ( Settersten, 2007 ), suggesting the importance of studying grandparenting. Grandparents’ relationships with their grandchildren are generally related to higher well-being for both grandparents and grandchildren, with some important exceptions such as when they involve more extensive childcare responsibilities ( Kim, Kang, & Johnson-Motoyama, 2017 ; Lee, Clarkson-Hendrix, & Lee, 2016 ). Most grandparents engage in activities with their grandchildren that they find meaningful, feel close to their grandchildren, consider the grandparent role important ( Swartz, 2009 ), and experience lower well-being if they lose contact with their grandchildren ( Drew & Silverstein, 2007 ). However, a growing proportion of children live in households maintained by grandparents ( Settersten, 2007 ), and grandparents who care for their grandchildren without the support of the children’s parents usually experience greater stress ( Lee et al., 2016 ) and more depressive symptoms ( Blustein, Chan, & Guanais, 2004 ), sometimes juggling grandparenting responsibilities with their own employment ( Harrington Meyer, 2014 ). Using professional help and community services reduced the detrimental effects of grandparent caregiving on well-being ( Gerard, Landry-Meyer, & Roe, 2006 ), suggesting that future policy could help mitigate the stress of grandparent parenting and enhance the rewarding aspects of grandparenting instead.

Substantial evidence suggests that the experience of intergenerational relationships varies for men and women. Women tend to be more involved with and affected by intergenerational relationships, with adult children feeling closer to mothers than fathers ( Swartz, 2009 ). Moreover, relationship quality with children is more strongly associated with mothers’ well-being than with fathers’ well-being ( Milkie et al., 2008 ). Motherhood may be particularly salient to women ( McQuillan, Greil, Shreffler, & Tichenor, 2008 ), and women carry a disproportionate share of the burden of parenting, including greater caregiving for young children and aging parents as well as time deficits from these obligations that lead to lower well-being ( Nomaguchi et al., 2005 ; Pinquart & Sorensen, 2006 ). Mothers often report greater parental pressures than fathers, such as more obligation to be there for their children ( Reczek, Thomeer, et al., 2014 ; Stone, 2007 ), and to actively work on family relationships ( Erickson, 2005 ). Mothers are also more likely to blame themselves for poor parent–child relationship quality ( Elliott, Powell, & Brenton, 2015 ), contributing to greater distress for women. It is important to take into account the different pressures and meanings surrounding intergenerational relationships for men and for women in future research.

Family scholars have noted important variations in family dynamics and constraints by race-ethnicity and socioeconomic status. Lower SES can produce and exacerbate family strains ( Conger, Conger, & Martin, 2010 ). Socioeconomically disadvantaged adult children may need more assistance from parents and grandparents who in turn have fewer resources to provide ( Seltzer & Bianchi, 2013 ). Higher SES and white families tend to provide more financial and emotional support, whereas lower SES, black, and Latino families are more likely to coreside and provide practical help, and these differences in support exchanges contribute to the intergenerational transmission of inequality through families ( Swartz, 2009 ). Moreover, scholars have found that a happiness penalty exists such that parents of young children have lower levels of well-being than nonparents; however, policies such as childcare subsidies and paid time off that help parents negotiate work and family responsibilities explain this disparity ( Glass, Simon, & Andersson, 2016 ). Fewer resources can also place strain on grandparent–grandchild relationships. For example, well-being derived from these relationships may be unequally distributed across grandparents’ education level such that those with less education bear the brunt of more stressful grandparenting experiences and lower well-being ( Mahne & Huxhold, 2015 ). Both the burden of parenting grandchildren and its effects on depressive symptoms disproportionately fall upon single grandmothers of color ( Blustein et al., 2004 ). These studies demonstrate the importance of understanding structural constraints that produce greater stress for less advantaged groups and their impact on family relationships and well-being.

Research on intergenerational relationships suggests the importance of understanding greater complexity in these relationships in future work. For example, future research should pay greater attention to diverse family structures and perspectives of multiple family members. There is an increasing trend of individuals delaying childbearing or choosing not to bear children ( Umberson, Pudrovska, et al., 2010 ). How might this influence marital quality and general well-being over the life course and across different social groups? Greater attention to the quality and context of intergenerational relationships from each family member’s perspective over time may prove fruitful by gaining both parents’ and each child’s perceptions. This work has already yielded important insights, such as the ways in which intergenerational ambivalence (simultaneous positive and negative feelings about intergenerational relationships) from the perspectives of parents and adult children may be detrimental to well-being for both parties ( Fingerman, Pitzer, Lefkowitz, Birditt, & Mroczek, 2008 ; Gilligan, Suitor, Feld, & Pillemer, 2015 ). Future work understanding the perspectives of each family member could also provide leverage in understanding the mixed findings regarding whether living in blended families with stepchildren influences well-being ( Gennetian, 2005 ; Harcourt, Adler-Baeder, Erath, & Pettit, 2013 ) and the long-term implications of these family structures when older adults need care ( Seltzer & Bianchi, 2013 ). Longitudinal data linking generations, paying greater attention to the context of these relationships, and collected from multiple family members can help untangle the ways in which family members influence each other across the life course and how multiple family members’ well-being may be intertwined in important ways.

Future studies should also consider the impact of intersecting structural locations that place unique constraints on family relationships, producing greater stress at some intersections while providing greater resources at other intersections. For example, same-sex couples are less likely to have children ( Carpenter & Gates, 2008 ) and are more likely to provide parental caregiving regardless of gender ( Reczek & Umberson, 2016 ), suggesting important implications for stress and burden in intergenerational caregiving for this group. Much of the work on gender, sexuality, race, and socioeconomic status differences in intergenerational relationships and well-being examine one or two of these statuses, but there may be unique effects at the intersection of these and other statuses such as disability, age, and nativity. Moreover, these effects may vary at different stages of the life course.

Sibling Relationships

Sibling relationships are understudied, and the research on adult siblings is more limited than for other family relationships. Yet, sibling relationships are often the longest lasting family relationship in an individual’s life due to concurrent life spans, and indeed, around 75% of 70-year olds have a living sibling ( Settersten, 2007 ). Some suggest that sibling relationships play a more meaningful role in well-being than is often recognized ( Cicirelli, 2004 ). The available evidence suggests that high quality relationships characterized by closeness with siblings are related to higher levels of well-being ( Bedford & Avioli, 2001 ), whereas sibling relationships characterized by conflict and lack of closeness have been linked to lower well-being in terms of major depression and greater drug use in adulthood ( Waldinger, Vaillant, & Orav, 2007 ). Parental favoritism and disfavoritism of children affects the closeness of siblings ( Gilligan, Suitor, & Nam, 2015 ) and depression ( Jensen, Whiteman, Fingerman, & Birditt, 2013 ). Similar to other family relationships, sibling relationships can be characterized by both positive and negative aspects that may affect elements of the stress process, providing both resources and stressors that influence well-being.

Siblings play important roles in support exchanges and caregiving, especially if their sibling experiences physical impairment and other close ties, such as a spouse or adult children, are not available ( Degeneffe & Burcham, 2008 ; Namkung, Greenberg, & Mailick, 2017 ). Although sibling caregivers report lower well-being than noncaregivers, sibling caregivers experience this lower well-being to a lesser extent than spousal caregivers ( Namkung et al., 2017 ). Most people believe that their siblings would be available to help them in a crisis ( Connidis, 1994 ; Van Volkom, 2006 ), and in general support exchanges, receiving emotional support from a sibling is related to higher levels of well-being among older adults ( Thomas, 2010 ). Relationship quality affects the experience of caregiving, with higher quality sibling relationships linked to greater provision of care ( Eriksen & Gerstel, 2002 ) and a lower likelihood of emotional strain from caregiving ( Mui & Morrow-Howell, 1993 ; Quinn, Clare, & Woods, 2009 ). Taken together, these studies suggest the importance of sibling relationships for well-being across the adult life course.

The gender of the sibling dyad may play a role in the relationship’s effect on well-being, with relationships with sisters perceived as higher quality and linked to higher well-being ( Van Volkom, 2006 ), though some argue that brothers do not show their affection in the same way but nevertheless have similar sentiments towards their siblings ( Bedford & Avioli, 2001 ). General social support exchanges with siblings may be influenced by gender and larger family context; sisters exchanged more support with their siblings when they had higher quality relationships with their parents, but brothers exhibited a more compensatory role, exchanging more emotional support with siblings when they had lower quality relationships with their parents ( Voorpostel & Blieszner, 2008 ). Caregiving for aging parents is also distributed differently by gender, falling disproportionately on female siblings ( Pinquart & Sorensen, 2006 ), and sons provide less care to their parents if they have a sister ( Grigoryeva, 2017 ). However, men in same-sex marriages were more likely than men in different-sex marriages to provide caregiving to parents and parents-in-law ( Reczek & Umberson, 2016 ), which may ease the stress and burden on their female siblings.

Although there is less research in this area, family scholars have noted variations in sibling relationships and their effects by race-ethnicity and socioeconomic status. Lower socioeconomic status has been associated with reports of feeling less attached to siblings and this influences several outcomes such as obesity, depression, and substance use ( Van Gundy et al., 2015 ). Fewer socioeconomic resources can also limit the amount of care siblings provide ( Eriksen & Gerstel, 2002 ). These studies suggest sibling relationship quality as an axis of further disadvantage for already disadvantaged individuals. Sibling relationships may influence caregiving experiences by race as well, with black caregivers more likely to have siblings who also provide care to their parents than white caregivers ( White-Means & Rubin, 2008 ) and sibling caregiving leading to lower well-being among white caregivers than minority caregivers ( Namkung et al., 2017 ).

Research on within-family differences has made great strides in our understanding of family relationships and remains a fruitful area of growth for future research (e.g., Suitor et al., 2017 ). Data gathered on multiple members within the same family can help researchers better investigate how families influence well-being in complex ways, including reciprocal influences between siblings. Siblings may have different perceptions of their relationships with each other, and this may vary by gender and other social statuses. This type of data might be especially useful in understanding family effects in diverse family structures, such as differences in treatment and outcomes of biological versus stepchildren, how characteristics of their relationships such as age differences may play a role, and the implications for caregiving for aging parents and for each other. Moreover, it is important to use longitudinal data to understand the consequences of these within-family differences over time as the life course unfolds. In addition, a greater focus on heterogeneity in sibling relationships and their consequences at the intersection of gender, race-ethnicity, SES, and other social statuses merit further investigation.

Relationships with family members are significant for well-being across the life course ( Merz, Consedine, et al., 2009 ; Umberson, Pudrovska, et al., 2010 ). As individuals age, family relationships often become more complex, with sometimes complicated marital histories, varying relationships with children, competing time pressures, and obligations for care. At the same time, family relationships become more important for well-being as individuals age and social networks diminish even as family caregiving needs increase. Stress process theory suggests that the positive and negative aspects of relationships can have a large impact on the well-being of individuals. Family relationships provide resources that can help an individual cope with stress, engage in healthier behaviors, and enhance self-esteem, leading to higher well-being. However, poor relationship quality, intense caregiving for family members, and marital dissolution are all stressors that can take a toll on an individual’s well-being. Moreover, family relationships also change over the life course, with the potential to share different levels of emotional support and closeness, to take care of us when needed, to add varying levels of stress to our lives, and to need caregiving at different points in the life course. The potential risks and rewards of these relationships have a cumulative impact on health and well-being over the life course. Additionally, structural constraints and disadvantage place greater pressures on some families than others based on structural location such as gender, race, and SES, producing further disadvantage and intergenerational transmission of inequality.

Future research should take into account greater complexity in family relationships, diverse family structures, and intersections of social statuses. The rapid aging of the U.S. population along with significant changes in marriage and families suggest more complex marital and family histories as adults enter late life, which will have a large impact on family dynamics and caregiving. Growing segments of family relationships among older adults include same-sex couples, those without children, and those experiencing marital transitions leading to diverse family structures, which all merit greater attention in future research. Moreover, there is some evidence that strain in relationships can be beneficial for certain health outcomes, and the processes by which this occurs merit further investigation. A greater use of longitudinal data that link generations and obtain information from multiple family members will help researchers better understand the ways in which these complex family relationships unfold across the life course and shape well-being. We also highlighted gender, race-ethnicity, and socioeconomic status differences in each of these family relationships and their impact on well-being; however, many studies only consider one status at a time. Future research should consider the impact of intersecting structural locations that place unique constraints on family relationships, producing greater stress or providing greater resources at the intersections of different statuses.

The changing landscape of families combined with population aging present unique challenges and pressures for families and health care systems. With more experiences of age-related disease in a growing population of older adults as well as more complex family histories as these adults enter late life, such as a growing proportion of diverse family structures without children or with stepchildren, caregiving obligations and availability may be less clear. It is important to address ways to ease caregiving or shift the burden away from families through a variety of policies, such as greater resources for in-home aid, creation of older adult residential communities that facilitate social interactions and social support structures, and patient advocates to help older adults navigate health care systems. Adults in midlife may experience competing family pressures from their young children and aging parents, and policies such as childcare subsidies and paid leave to care for family members could reduce burden during this often stressful time ( Glass et al., 2016 ). Professional help and community services can also reduce the burden for grandparents involved in childcare, enabling grandparents to focus on the more positive aspects of grandparent–grandchild relationships. It is important for future research and health promotion policies to take into account the contexts and complexities of family relationships as part of a multipronged approach to benefit health and well-being, especially as a growing proportion of older adults reach late life.

This work was supported in part by grant, 5 R24 HD042849, Population Research Center, awarded to the Population Research Center at The University of Texas at Austin by the Eunice Kennedy Shriver National Institute of Child Health and Human Development.

Conflict of Interest

None reported.

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A Critical Study Of Medical Negligence In India, Regulations And Case Laws

Contributor.

WHAT IS MEDICAL NEGLIGENCE

"Medical negligence" is a term commonly used to describe the wrongful actions or omissions of healthcare professionals in the course of their practice, which can result in harm to patients. While not specifically defined in Indian laws, it has gained widespread recognition in legal discourse. This article aims to provide a simplified overview of medical negligence, drawing primarily from judicial opinions of higher courts in India rather than delving into complex legal terminology.

The focus of this piece is to inform readers about the basic features of medical negligence without delving into intricate legal nuances. Rather than exploring contentious issues, the approach taken here is descriptive, aiming to offer clarity on the subject matter. The methodology adopted relies on select judicial opinions, providing a snapshot of how courts have interpreted and applied principles related to medical negligence.

Consequences of medical negligence:

Medical negligence can have serious consequences for patients, including physical harm, emotional distress, financial burdens, and loss of trust in healthcare providers. By outlining these broad consequences, readers can grasp the gravity of medical negligence and its impact on individuals and families.

Basic constituents of medical negligence:

Medical negligence typically involves a breach of the duty of care owed by healthcare professionals to their patients. This breach occurs when a practitioner fails to meet the expected standard of care, resulting in harm to the patient. Understanding these basic constituents helps elucidate the elements required to establish medical negligence in legal proceedings.

WHAT CONSTITUTES MEDICAL NEGLIGENCE?

Patients typically choose a doctor or hospital based on its reputation. They have two primary expectations: first, that doctors and hospitals will provide medical treatment using all their expertise and knowledge; and second, that they will avoid causing harm due to negligence, carelessness, or recklessness. Therefore, it is expected that a doctor conducts necessary investigations or requests relevant reports from the patient. Additionally, unless it is an emergency, the doctor should obtain the patient's informed consent before proceeding with any significant treatment, surgical operation, or invasive procedure. If a doctor or hospital fails to fulfill these responsibilities, they can be held liable for tortious acts. A tort is a civil wrong ( right in rem ) distinct from a contractual obligation ( right in personam ) and can result in judicial intervention through the awarding of damages. Consequently, a patient's right to receive medical care is fundamentally a civil right. The relationship also takes on contractual elements due to informed consent, payment of fees, and the performance of medical procedures, while still retaining essential aspects of tort law.

In the case of Dr. Laxman Balkrishna Joshivs. Dr. Trimbark Babu Godbole and Anr. 1 and A.S.Mittal v. State of U.P . 2 , it was laid down by the Hon'ble Supreme Court that when a doctor is consulted by a patient, the doctor owes to his patient certain duties which are: (a) duty of care in deciding whether to undertake the case, (b) duty of care in deciding what treatment to give, and (c) duty of care in the administration of that treatment. A breach of any of the aforementioned duties may give a cause of action for negligence and the patient may on that basis recover damages from his doctor. In the aforementioned cases, the apex court interalia observed that negligence has many manifestations – it may be active negligence, collateral negligence, comparative negligence, concurrent negligence, continued negligence, criminal negligence, gross negligence, hazardous negligence, active and passive negligence, willful or reckless negligence, or negligence per se. 3

CONSEQUENCES OF MEDICAL NEGLIGENCE

The consequences of legally cognizable medical negligence can broadly be put into three categories:(i) Criminal liability, (ii) monetary liability, and (iii) disciplinary action.

Criminal liability can be fastened pursuant to the provisions of the Indian Penal Code, 1860 (" IPC "), which are general in nature and do not provide specifically for "medical negligence." For instance, Section 304A of IPC 3 (which deals with the death of a person by any rash or negligent act and leads to imprisonment up to 2 years) is used to deal with both cases of accidents caused due to rash and negligent motor vehicle driving and also medical negligence leading to the death of a patient. Similarly, other general provisions of IPC, such as Section 337 ( 4 ) (causing hurt) and 338( 5 ) (causing grievous hurt), are also often deployed in relation to medical negligence cases.

Civil liability, i.e., monetary compensation can be fastened under the general law by pursuing a remedy before appropriate civil court or consumer forums. An action seeking imposition of the civil liability on the erring medical professional is initiated by dependents of the deceased patient or by the patient himself (if alive) to seek compensation. Doors of permanentlok adalats, constituted pursuant to the Legal Services Authority Act, 1987, can also be knocked at by a complainant seeking relief in the relation to services "in a hospital or dispensary" which are considered to be "public utility services" within the meaning thereof, wherein first a conciliation is attempted and thereafter determination on merits of the matter is made. Permanentlok adalatsare conferred powers akin to that of a civil court in specified matters (such as summoning and enforcing the attendance of witnesses) and have jurisdiction in the matters up to Rs. 1 Crore. 4

Another consequence of medical negligence could be in the form of imposition of penalties pursuant to disciplinary action. Professional misconduct by medical practitioners is governed by the Indian Medical Council (IMC) (Professional Conduct, Etiquette, and Ethics) Regulations, 2002, made under IMC Act, 1956. Medical Council of India (MCI) and the appropriate State Medical Councils are empowered to take disciplinary action whereby the name of the practitioner could be removed forever or be suspended. Professional misconduct is, however, a broad term which may or may not include medical negligence within its fold. For instance, in the context of lawyers, it is not only a professional misconduct but other misconduct also which may lead to imposition of disciplinary penalties, for example, violation of prohibition on liquor under Bombay Prohibition Act, 1949, by the advocate;and perhaps a corollary may be extended for cases of medical negligence by medical professionals.

Understanding the extent of negligence involves grasping the duties imposed on doctors and medical practitioners. These professionals have various responsibilities, including deciding whether to take on a case, determining treatment, administering that treatment, and ensuring they do not undertake procedures beyond their expertise. It's expected they bring a reasonable level of skill and knowledge while exercising care. Negligence, in essence, occurs when there's a breach of this duty, resulting in injury or harm.

The link between breach and injury is crucial in establishing negligence, requiring a direct or proximate causal relationship. For instance, if a patient dies due to receiving the wrong blood type transfusion, despite subsequent care, the negligence of the medical practitioner is evident due to the proximate link between the transfusion and the patient's death.

Differentiating between civil and criminal liability in negligence cases presents challenges, with no clear criteria established by the Supreme Court. While civil liability may arise from a lack of care or skill, criminal liability requires gross or reckless negligence. For example, in a case where a patient died due to a procedural error during a nasal deformity correction, the Supreme Court quashed the criminal prosecution, emphasizing the need for a high level of negligence to establish criminal liability.

Medical negligence cases often rely on expert opinions from both sides. While these opinions are relevant, they're not conclusive, and the court retains the discretion to assess their validity. If the court finds the actions of the medical professional to be highly unreasonable or inconceivable, it may conclude that medical negligence occurred, regardless of expert testimony.

In summary, medical negligence cases hinge on establishing breaches of duty resulting in harm to patients. While the legal distinctions between civil and criminal liability can be complex, courts rely on expert opinions and evidence to determine the presence of negligence.

NEGLIGENCE PER SE

In the case of Poonam Verma vs. Ashwin Patel and Ors. 5 , the Hon'ble Supreme Court ruled that a homeopathic doctor practicing allopathy without the proper qualifications is considered a quack. The Court stated that if someone is guilty of negligence per se, no further evidence is needed to prove it.

DUTY ON THE PART OF A HOSPITAL AND DOCTOR TO OBTAIN PRIOR CONSENT OF A PATIENT

There is a duty to obtain prior consent for various purposes, including diagnosis, treatment, organ transplants, research, disclosure of medical records, teaching, and medico-legal activities for living patients. For deceased individuals, informed consent is necessary for pathological postmortems, medico-legal postmortems, organ transplants for legal heirs, and disclosure of medical records. Consent can be given in several ways:

• Express Consent: This can be oral or written. While both are equally valid, written consent is superior due to its evidential value.
• Implied Consent: Implied by the patient's conduct.
• Tacit Consent: Understood without being explicitly stated.
• Surrogate Consent: Given by family members, typically with the written approval of two physicians, as courts have deemed this sufficient to protect the patient's interests.
• Advance consent, proxy consent, and presumed consent are also used. While the term advance consent is the consent given by patient in advance, proxy consent indicates consent given by an authorized person. As mentioned earlier, informed consent obtained after explaining all possible risks and side effects is superior to all other forms of consent. Informed consent, obtained after explaining all possible risks and side effects, is considered superior to all other forms of consent. 6

THE IMPORTANCE OF OBTAINING INFORMED CONSENT

In the case of Samira Kohli vs. Dr. Prabha Manchanda and Ors. 7 the Hon'ble Supreme Court ruled that consent for diagnostic and operative laparoscopy, including " laparotomy if needed " does not equate to consent for a total hysterectomy with bilateral salpingo-oophorectomy. The appellant, an adult who was neither a minor nor mentally incapacitated, was temporarily unconscious under anaesthesia at the time. Since there was no emergency, the respondent should have waited for the appellant to regain consciousness and provide proper consent. Consequently, the consent given by the patient's mother was not valid, as there was no emergency justifying it. The issue was not about the medical necessity of the procedure but the failure to obtain the patient's consent for the removal of her reproductive organs. Performing surgery without consent constitutes unauthorized invasion and interference with the appellant's body. As a result, the respondent was denied the entire fee for the surgery and was ordered to pay INR 25,000 as compensation for the unauthorized procedure.

RELATION OF PATIENTS, DOCTORS AND HOSPITALS FALL UNDER THE CONSUMER PROTECTION ACT, 1986

In the case of Indian Medical Association vs. V.P. Shanta and Ors. 8 the Supreme Court clarified that the medical profession falls under the Consumer Protection Act, 1986, eliminating any ambiguity on the matter. This landmark decision made it clear to doctors and hospitals that all patients are considered consumers, regardless of whether the treatment is paid for or provided free of charge. The Court acknowledged that a small percentage of patients might not respond to treatment, as medical literature documents such failures despite proper care and treatment. Family planning operation failures are a notable example. The Supreme Court advised against burdening medical professionals with ex gratia awards for such failures. Similarly, in several landmark decisions, the National Medical Commission has acknowledged that hospital deaths can occur without any negligence being involved.

COMPENSATIONS IN CASES OF MEDICAL NEGLIGENCE 9

In the context of medical negligence, it is noteworthy to recall the Hon'ble Supreme Court's decision in the case of State of Haryana and Ors v. Smt. Santra 10 , where Justices S. Saghir Ahmad and D.P. Wadhwa upheld a claim for compensation due to defective sterilization. Smt. Santra underwent a sterilization operation that only involved her right fallopian tube, leaving the left fallopian tube untouched. As a result, she became pregnant and gave birth to a child despite undergoing the procedure. This was deemed a defective service.

The claim for damages was based on the principle that anyone committing a civil wrong must pay compensation to the injured party. The Supreme Court held that "maintenance" includes food, clothing, residence, education of children, and medical treatment. This obligation arises from the parent-child relationship and is statutory and personal.

On the topic of medical negligence, the Court reiterated that negligence is a tort. Doctors are expected to act with reasonable care and skill, a duty that arises from their professional commitment. This aligns with the principle established in Bolam v. Friern Hospital Management Committee 11 , where McNair, J. stated that a medical professional is not required to possess the highest level of skill but must exercise the ordinary skill of a competent practitioner in the field. Failure to meet this standard constitutes negligence.

In the case of Spring Meadows Hospital and Anr. v. Harjol Ahluwalia 12 , the Supreme Court awarded compensation due to negligence that resulted in severe harm. A child became permanently incapacitated after a nurse administered an adult dose of an injection meant for a child. The court awarded INR. 5 lakhs for the mental anguish caused to the parents, in addition to approximately INR. 12 lakhs to the child. While the insurance company covered the INR. 12 lakhs, the hospital was responsible for the balance. The Court emphasized that the negligence of unqualified staff, like the nurse in this case, contributed to the liability of the hospital.

The rulings highlight the importance for doctors and hospitals to not only obtain Professional Indemnity Insurance but also ensure that all medical and support staff are properly qualified and competent. This helps mitigate the risk of negligence and ensures that patients receive the standard of care they are entitled to.

MEDICAL ETHICS AND THE TREATMENT OF ACCIDENT VICTIMS

In the case of Pravat Kumar Mukherjee vs. Ruby General Hospital and Ors , 13 , the National Medical Commission delivered a landmark decision concerning the treatment of an accident victim by the hospital. The case involved the tragic death of Shri Sumanta Mukherjee, a second-year B. Tech. electrical engineering student at Netaji Subhash Chandra Bose Engineering College. On January 14, 2001, Sumanta was involved in a motorcycle accident with a bus from the Calcutta Tramway Corporation. He was conscious after the accident and was taken to Ruby General Hospital, about 1 km from the accident site. Sumanta was insured for INR 65,000/- under a Mediclaim Policy issued by the New India Assurance Co. Ltd.

Upon arrival at the hospital, Sumanta was still conscious and showed the Mediclaim certificate he was carrying. He assured the hospital that the charges for his treatment would be paid and requested that they begin treatment. Based on this assurance, the hospital started treatment in its emergency room by giving moist oxygen, starting suction, and administering injections of Driphylline, Lycotinx, and titanous toxoid. However, the hospital demanded an immediate payment of INR 15,000/- and discontinued treatment when the amount was not immediately deposited, despite assurances from the accompanying public that the amount would be paid. The crowd managed to collect INR 2,000/- and offered it along with the patient's motorcycle and insurance receipt, but the hospital remained adamant and discontinued treatment after 45 minutes.

Forced by the hospital's refusal to continue treatment, the crowd took Sumanta to National Calcutta Medical College, approximately 7-8 km away. Unfortunately, Sumanta died en route and was declared dead upon arrival at the medical college.

The National Medical Commission allowed the complaint and directed Ruby Hospital to pay INR. 10 lakhs to the complainants for mental pain and agony. The Commission observed: " This may serve the purpose of bringing about a qualitative change in the attitude of the hospitals of providing service to human beings as human beings. A human touch is necessary; that is their code of conduct; that is their duty and that is what is required to be implemented. In emergency or critical cases, let them discharge their duty/social obligation of rendering service without waiting for fee or for consent ."

The decision highlighted several key points as mentioned below:

• Compensation Basis/Grounds : The National Medical Commission rejected the contention that the deceased or complainant was not a consumer due to the absence of payment. It held that persons provided with free services are beneficiaries of services availed by paying customers. Emergency or critically ill patients are in a similar position as those unable to pay. Thus, free services are still considered services, and recipients are consumers under the Act. Discontinuation of treatment, which hastened the patient's death, was deemed a deficiency in service. The hospital's refusal to admit and treat a critically injured youth violated medical ethics and the Clinical Establishment Rules and Act of 1950, as amended in 1998. The hospital's failure to have the patient sign a document or risk bond before transferring him was also criticized.
• Consent for Treatment : The Commission dismissed the argument that there was no consent for treatment. In emergencies, immediate treatment is required, and waiting for consent is impractical. Consent is implicit in such cases. A surgeon who fails to perform an emergency operation must prove that the patient refused after being informed of the risks. Waiting for consent from a patient or a passer-by is an apparent failure of duty. Deficiency in service was thus established, justifying the compensation.
• Maintainability of Consumer Case with Pending MACT Case: The National Medical Commission held that a Motor Accident Claims Tribunal (MACT) case does not bar a complaint under the Consumer Protection Act . The causes of action are different and must be decided by separate tribunals/forums. The MACT case involves rash and negligent driving causing the accident, while the consumer complaint pertains to the deficiency in rendering emergency medical treatment. Since the causes are separate and distinct, the complaint is maintainable.

This decision underscores the importance of hospitals and medical professionals adhering to their ethical and legal obligations to provide timely and adequate treatment, especially in emergency situations.

LANDMARK CASE LAW AND THEIR IMPORTANCE 14

• The death of a patient while undergoing treatment does not amount to medical negligence.

In the case of Dr. Ganesh Prasad and Anr. v. Lal Janamajay Nath Shahdeo, 15 , the National Medical Commission, in an order delivered by Mrs. Rajalaxmi Rao, Member, reaffirmed the principle that if proper treatment is provided and death occurs due to the progression of a disease and its complications, it cannot be deemed as negligence on the part of doctors or hospitals. The lower forums' decisions did not support the claim for compensation in this case. Here, a 4 ½-year-old child suffering from cerebral malaria was admitted to the hospital, where a life-saving injection was administered. According to the child specialist's opinion, the doses were safe and the treatment was appropriate. Despite the unfortunate death of the child, it was concluded that there was no negligence on the part of the doctor.

It's emphasized that an opinion based on the practices of one school of thought may not constitute medical negligence when there are two equally valid schools of thought. The observations made by the National Medical Commission in the case of Dr. Subramanyam and Anr. v. Dr. B. Krishna Rao and Anr. 16 regarding medical negligence are particularly enlightening. This case involved a complaint filed by a well-qualified doctor against another professional who had treated his wife with endoscopic sclerotherapy. The complainant alleged that the patient was poorly managed upon admission to the Nursing Home, leading to her death due to negligence and improper treatment by Dr. B. Krishna Rao.

The Hon'ble Commission observed that the principles concerning medical negligence are well-established. A doctor can only be found guilty of medical negligence if they fall short of the standard of reasonable medical care. Mere errors of judgment, especially in matters of opinion, do not necessarily constitute negligence. Moreover, it is recognized that when there are genuinely two responsible schools of thought regarding the management of a clinical situation, it would be detrimental to the community and the advancement of medical science to favour one form of treatment over another in legal proceedings.

• Error of judgment in diagnosis or failure to cure a disease does not necessarily mean medical negligence.

In the case of Dr. Kunal Saha vs. Dr. Sukumar Mukherjee and Ors . 17 the National Medical Commission, under the leadership of Mr. Justice M. B. Shah as President, deliberated on allegations of medical negligence concerning the diagnosis, treatment, and facilities provided by the Opponent doctors and hospital. The complainant, Dr. Kunal Saha, sought compensation totaling INR. 77,76,73,500/-, claiming negligence in the administration of medication (specifically alleging an overdose of steroids), as well as deficiencies in hospital facilities (such as the absence of a burn unit).

The National Medical Commission determined that an error in medical diagnosis does not necessarily constitute a deficiency in service. It noted that the deceased, who was the wife of the complainant, suffered from Toxic Epidermal Necrolysis (TEN), a rare disease with a mortality rate ranging from 25% to 70% according to medical literature. Considering the complexities and specific circumstances of the case, the Commission concluded that the doctor could not be held liable for an inaccurate diagnosis.

This case underscores the Commission's stance that medical professionals cannot be faulted solely for errors in diagnosis, especially when dealing with uncommon and complex medical conditions where varying medical opinions exist. The decision highlights the Commission's careful consideration of medical standards and the challenges inherent in diagnosing and treating rare diseases.

• Role of expert opinion

In the case of Sethuraman Subramniam Iyer vs. Triveni Nursing Home and Anr. 18 the National Medical Commission dismissed the complaint due to the absence of expert evidence on behalf of the complainant. Similarly, in the case of ABGP vs. Jog Hospital , the complaint was deemed not maintainable. Additionally, in the case of Farangi Lal Mutneja vs. Shri Guru Harkishan Sahib Eye Hospital Sahana and Anr ., 19 the Union Territory Commission in Chandigarh dismissed the claim of medical negligence with the following observation: " The Opposite Party conducted an eye operation on the complainant, resulting in subsequent damage to the cornea and loss of visibility. The complainant alleged that proper dilation of the eye was not performed before the cataract operation and that the procedure was rushed. However, the Medical Council of India, after obtaining expert opinions from two reputable institutions, concluded that standard treatment protocols were followed and optimal procedures were carried out. Therefore, it was determined that there was no negligence on the part of the Opposite Party ."

These cases illustrate the importance of presenting expert evidence in medical negligence claims and highlight instances where complaints were dismissed due to lack of such evidence or because they were deemed not maintainable. Additionally, the decision in Farangi Lal Mutneja vs. Shri Guru Harkishan Sahib Eye Hospital Sahana and Anr. emphasizes the significance of expert opinions in assessing medical procedures and determining the presence or absence of negligence.

• Medical Literature:

In the case of P. Venkata Lakshmivs. Dr. Y. Savita Devi , 20 the National Medical Commission held that the State Commission ought to have considered the medical literature filed by the complainant and the State Commission had dismissed the complaint on the grounds that there was no expert evidence and remanded the matter.

• Quantum of compensation:

In the case of IMA vs. V.P. Shanta and Ors . 21 the Supreme Court made a significant observation regarding the quantum of compensation payable to an injured patient due to medical negligence. The Hon'ble Court stated: " A patient who has suffered injury as a result of medical negligence has endured a loss that is recognized both by the law and by society as deserving compensation. This loss may be ongoing, and what may appear to be an excessively large award may simply be the amount necessary to adequately compensate the patient for various factors such as loss of future earnings and the future expenses of medical or nursing care. To deny a legitimate claim or arbitrarily restrict the size of the compensation would amount to a grave injustice. In legal terms, there is no distinction between a plaintiff injured through medical negligence and a plaintiff injured in an industrial or motor accident ."

This statement underscores the Court's recognition of the significant harm and financial burden incurred by patients due to medical negligence. It emphasizes the need for compensation to address not only immediate losses but also long-term consequences such as loss of income and ongoing medical expenses. The Court's comparison between patients injured through medical negligence and those injured in other types of accidents underscores the principle of equity and fairness in awarding compensation for harm suffered.

• Engaging a specialist when available is obligatory:

In the case of Prashanth S. Dhananka vs. Nizam Institute of Medical Science and Ors , 22 the National Medical Commission addressed several pivotal issues related to medical negligence. These included defining what constitutes medical negligence, the obligation of hospitals to engage specialists when available, the vicarious liability of hospitals for the actions of doctors and staff, and the determination of compensation for mental and physical suffering.

The National Medical Commission also deliberated on whether compensation should be granted when doctors decide against surgery and the patient subsequently passes away. In the case of Narasimha Reddy and Ors. vs. Rohini Hospital and Anr , 23 it was established that if a patient's critical condition prevents surgery, and the doctor adheres to proper medical practices and exercises reasonable care in treatment, they cannot be deemed negligent. Consequently, the Commission dismissed the revision petition filed by the complainant.

Furthermore, it was noted that if a patient fails to provide accurate medical history, the doctor cannot be held accountable for resulting consequences. In S. Tiwari vs. Dr. Pranav , 24 where a tooth extraction was performed without proper testing and subsequent bleeding occurred, the doctor administered a painkiller. Despite the patient having a blood pressure reading of 130/90, they did not disclose their full medical history to the doctor. The National Medical Commission upheld the State Commission's findings and dismissed the complaint, citing the patient's failure to provide accurate medical history and follow-up when required.

• Hospital is vicariously liable for any wrong claiming on the part of consultants

In the case of Ms. Neha Kumari and Anr. v. Apollo Hospital and Ors , 25 the National Medical Commission addressed allegations of medical negligence. The complainants claimed compensation of INR 26,90,000, asserting that during a spinal canal operation, a rod was improperly fitted at the wrong level, leading to dysfunction of the lower limbs.

The National Medical Commission found that the alleged medical negligence was not substantiated. It was revealed that Neha Kumari had complex birth defects of the spine and body, as evidenced by a pre-operative CT scan. It was noted that she had undergone surgery at the age of four. Detailed investigations indicated multiple congenital complications, including a kyphoscoliotic deformity of the mid dorsal spine with hemivertebrae and spinal bifida.

Regarding the delay in filing the appeal, the Commission found no sufficient cause presented to justify the delay.

The case of Basant Seth v. Regency Hospital 26 is significant as it establishes the hospital's vicarious liability for the actions of its consultants, despite the dismissal of the medical negligence claim. This highlights the importance of thorough investigations in determining such claims and underscores the hospital's responsibility for the conduct of its consultants.

The Supreme Court's decision in the case of State of Punjab vs. Shiv Ram and Ors . 27 is noteworthy for several reasons. Firstly, it emphasizes that awarding ex-gratia compensation against doctors and hospitals without findings of negligence is improper. Instead, the court suggests the need for a welfare fund or insurance scheme to address such situations. This pragmatic approach by the apex court reflects a holistic consideration of issues related to medical negligence, steering away from sympathetic considerations in awarding compensation.

In a full bench decision dated August 25, 2005, former Chief Justice of India, Justice R.C. Lahoti, made insightful observations regarding the medical profession's ethical obligations. He stressed the profession's humanitarian nature and emphasized the importance of self-regulation, highlighting that serving humanity should be the primary aim of the medical profession.

Furthermore, the Hon'ble Supreme Court's reaffirmation in the case of State of Haryana and Ors. vs. Raj Rani 28 , further underscores the principle that doctors can only be held liable for failures attributable to negligence during sterilization operations. The court clarified that compensation is not warranted if failure occurs due to natural causes beyond the surgeon's control. Additionally, any payments made by the state in such cases are deemed ex-gratia and are not recoverable.

These cases collectively underscore the nuanced considerations involved in medical negligence claims and highlight the courts' commitment to upholding professional standards while ensuring fairness and justice for all parties involved.

In conclusion, the extensive exploration of medical negligence in India reveals a complex landscape shaped by legal principles, ethical considerations, and practical challenges. The evolution of jurisprudence through landmark cases such as Indian Medical Association v. V.P. Shanta , which clarified the inclusion of medical services under consumer protection laws, underscores the judicial intent to uphold patient rights and professional accountability.

The principles laid down in various cases highlight that medical negligence is not confined to mere errors in judgment but encompasses failures to meet the standard of care expected from a reasonably competent medical professional. This standard, as articulated in Bolam v. Friern Hospital Management Committee , requires that doctors exercise the skill and knowledge typical of their peers in the medical community.

Furthermore, the concept of informed consent, exemplified in Samira Kohli v. Dr. Prabha Manchanda , emphasizes that patients have the right to make informed decisions about their treatment. This principle extends beyond emergencies, stressing the importance of transparency and patient autonomy in medical practice.

The legal framework also addresses the nuanced aspects of negligence, such as vicarious liability of hospitals for the actions of their staff, as seen in Basant Seth v. Regency Hospital . This doctrine ensures that institutions are held accountable for the conduct of their employees, reflecting broader implications for healthcare systems' governance and oversight.

Moreover, the role of expert opinions in adjudicating medical negligence claims, as evidenced in cases like P. Venkata Lakshmi v. Dr. Y. Savita Devi , underscores the necessity of specialized knowledge in evaluating complex medical procedures and outcomes. This reliance on expert testimony enhances the adjudicative process by providing informed insights into medical practices and standards.

The quantification of compensation in medical negligence cases, as elucidated by the Supreme Court in IMA v. V.P. Shanta , underscores the recognition of patients' suffering and economic losses. Such awards are crucial in addressing the multifaceted impacts of medical malpractice, including loss of livelihood and ongoing medical expenses.

However, the legal discourse surrounding medical negligence in India is not without challenges. Issues such as delays in adjudication, inconsistent application of legal precedents across different forums, and the burden of proof on complainants continue to pose obstacles to justice. The need for timely resolutions, equitable standards of proof, and uniformity in judicial interpretations remains critical for enhancing trust in the legal system's ability to address medical grievances effectively.

Furthermore, the ethical dimensions of medical practice, as emphasized by the National Medical Commission in Pravat Kumar Mukherjee v. Ruby General Hospital , underscore the imperative for compassionate and humane treatment of patients, especially in emergencies. These ethical imperative complements legal standards, promoting a holistic approach to patient care that prioritizes human dignity and well-being.

In conclusion, while India's legal framework for addressing medical negligence has evolved significantly, there is a continued need for vigilant adherence to established standards, procedural efficiency, and ethical considerations. The judiciary's commitment to upholding patient rights, ensuring accountability in medical practice, and fostering public confidence underscores its pivotal role in shaping a fair and equitable healthcare system. By addressing legal challenges, promoting professional integrity, and safeguarding patient welfare, India can further strengthen its framework for addressing medical negligence, thereby advancing justice and healthcare excellence for all.

Originally published on September 2, 2024

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16. II (1996) CPJ 233 (NC)

17. III (2006) CPJ 142 (NC)

18. I (1998) CPJ 110 (NC)

19. IV (2006) CPJ 96

20. II (2004) CPJ 14 (NC)

21. III (1995) CPJ I (SC)

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23. I (2006) CPJ 144 (NC)

24. I (1996) CPJ 301 (NC)

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28. IV (2005) CPJ 28 (SC)

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