Is there a theory of financial regulation? I wonder whether there exists (even a young) theory of financial regulation in the sense of "how to regulate a financial institution/system in an optimal manner"? I mean, there is experience about several situations which came across in the past, like bank runs, liquidity shortages, insufficient quality of regulatory capital etc. resulting in a crisis and, thus, representing a deviation from the optimal functioning of the financial system. This is then addressed by a regulatory reform which is designed to avoid exactly the experienced situation again in the future, i.e. it is specific to the current problem at hand. Is there something more general? The current approach focuses on ex-post fixing crucial issues, but does there exist a formal normative model or theory about regulating systems like the financial system?
So far, I didn't found something about that but maybe others have?
If not yet, maybe there exists some theory about other kinds of systems which one could apply in a modified version like Cybernetics for mechanical systems or the like?
Jean Tirole just won the Nobel Prize for his studies in regulation in different markets, including the banking market.

Check:


Balancing the Banks:
Global Lessons from the Financial Crisis and 
The Prudential Regulation of Banks