Computational Data Sciences and the Regulation of Banking and Financial Services

• Published in: From Social Data Mining and Analysis to Prediction and Community Detection pp. 179 - 209
• Main Authors: O’Halloran, Sharyn, Dumas, Marion, Maskey, Sameer, McAllister, Geraldine, Park, David K.
• Format: Book Chapter
• Language: English
• Published: Switzerland Springer International Publishing AG 2017; Springer International Publishing
• Series: Lecture Notes in Social Networks
• Subjects: Artificial intelligence; Big data; Data mining; Financial market regulation; Machine learning; Mathematical physics; Natural language process; Political economics; Topical modeling
• ISBN: 9783319513669; 3319513664
• ISSN: 2190-5428; 2190-5436
• DOI: 10.1007/978-3-319-51367-6_8

The development of computational data science techniques in natural language processing (NLP) and machine learning (ML) algorithms to analyze large and complex textual information opens new avenues to study intricate policy processes at a scale unimaginable even a few years ago. We apply these scalable NLP and ML techniques to analyze the United States Government’s regulation of the banking and financial services sector. First, we employ NLP techniques to convert the text of financial regulation laws into feature vectors and infer representative “topics” across all the laws. Second, we apply ML algorithms to the feature vectors to predict various attributes of each law, focusing on the amount of authority delegated to regulators. Lastly, we compare the power of alternative models in predicting regulators’ discretion to oversee financial markets. These methods allow us to efficiently process large amounts of documents and represent the text of the laws in feature vectors, taking into account words, phrases, syntax, and semantics. The vectors can be paired with predefined policy features, thereby enabling us to build better predictive measures of financial sector regulation. The analysis offers policymakers and the business community alike a tool to automatically score policy features of financial regulation laws to and measure their impact on market performance.