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Project Details
Funding Scheme : General Research Fund
Project Number : 17607119
Project Title(English) : Creating Credit: Law Reforms, Policy Tensions, and Disruptive Technologies 
Project Title(Chinese) : 創造信用:法律改革,政策緊張和顛覆性技術 
Principal Investigator(English) : Dr Castellano, Giuliano Giovanni Francesco 
Principal Investigator(Chinese) :  
Department : Department of Law, Asian Institute of International Financial Law
Institution : The University of Hong Kong
E-mail Address : g.castellano@hku.hk 
Tel :  
Co - Investigator(s) :
Dr Dubovec, Marek
Panel : Humanities, Social Sciences
Subject Area : Social and Behavioural Sciences
Exercise Year : 2019 / 20
Fund Approved : 686,476
Project Status : Completed
Completion Date : 31-3-2023
Project Objectives :
Systematically analyse the processes of reforming secured transactions laws; when those are guided by international soft-laws.
Isolate common patterns and key issues affecting the creation of credit through law reforms.
Shed new light on the tension between access to credit and financial stability.
Assess the impact of new technologies on domestic legal and regulatory frameworks.
Distil policy suggestions addressing the needs of jurisdictions in the Asia Pacific region.
Produce a book for publication in a reputable university press or, alternatively, produce two articles for submission to top-tier law journals.
Produce an additional article for submission to a top-tier law journal.
Abstract as per original application
(English/Chinese):
Inclusive access to credit is of paramount importance to reducing poverty. The expansion of credit has been supported by ambitious law reforms particularly in developing economies. By and large, these initiatives adhere to international legal standards and aim to reduce the risk of lending to micro and small businesses, individuals and, more generally, groups that are disenfranchised from society’s formal financial system. A conspicuous number of jurisdictions have embarked on reforming domestic laws to promote the use of secured transactions, whereby assets commonly available to micro and small businesses may be used as collateral for a loan, without requiring their delivery to the creditor. Yet, it remains unclear to what extent these reforms have succeeded in incentivising financiers – banks in particular – to provide new credit and promote financial inclusion. The effectiveness of such reform efforts is further challenged by profound political, economic, and technological changes that ushered the dawn of the new millennium. Specifically, the 2007-2008 global financial crisis and current concerns over the stability of emerging markets indicate the fragility of credit-based economies; whilst, the emergence of disruptive technologies in finance, commonly referred to as FinTech, is reshaping credit markets. This project, drawing from our research and direct involvement in the international and national policymaking processes, calls into questions dominant assumptions on the role of law in creating credit by carrying out the first comprehensive and comparative study on how law reforms are implemented across over 30 jurisdictions, mostly emerging economies. Common patterns in the strategies and methods deployed by law reformers are isolated to offer a new conceptual paradigm explaining the relationship between legal change and credit creation. To this end, the fundamental tension between access to credit and financial stability is gauged in different economic and legal contexts. Moreover, the project reassesses the relationship between law reforms and technology, as the very need to acquire collateral in order to reduce credit risk is probed by the advent of solutions based on artificial intelligence, smart contracts, and distributed ledger technology. Through this prism, our research indicates new pathways for policymakers to balance the need to expand the credit availability with the necessity of curbing the overaccumulation of debt. Specific suggestions are distilled to inform the debates concerning law reforms in key jurisdictions of the Asia Pacific region, including China, Hong Kong, and Japan.
包容性獲得信貸對減少貧困至關重要。信貸擴張得到雄心勃勃的法律改革的支持,特別是在發展中經濟體。總的來說,這些舉措符合國際法律標準,旨在降低向微型和小型企業,個人以及更普遍的社會正規金融體系剝奪權利的群體提供貸款的風險。顯著數量的司法管轄區已著手改革國內法以促進擔保交易的使用,通過微型和小型企業普遍可用的資產可用作貸款的抵押品,而無需將其交付給債權人。然而,目前尚不清楚這些改革在多大程度上成功地激勵金融家 - 特別是銀行 - 提供新的信貸並促進金融包容性。這一改革努力的有效性進一步受到了迎來新千年曙光的深刻政治,經濟和技術變革的挑戰。具體而言,2007 - 2008年全球金融危機和當前對新興市場穩定性的擔憂表明信貸型經濟體的脆弱性;而金融領域的顛覆性技術 正在重塑信貸市場。 該項目借鑒我們的研究並直接參與國際和國家政策制定過程,通過對30多個司法管轄區如何實施法律改革進行第一次全面和比較研究,提出了關於法律在創造信貸方面的作用的主要假設問。法律改革者所採用的戰略和方法中的共同模式被孤立,以提供一種新的概念範式,解釋法律變革與信用創造之間的關係。為此,在不同的經濟和法律背景下衡量獲得信貸和金融穩定之間的根本緊張關係。此外,該項目重新評估了法律改革與技術之間的關係,因為基於人工智能,智能合約和分佈式賬本技術的解決方案的出現,探索了獲取抵押品以降低信用風險的非常需要。 通過這一棱鏡,我們的研究為政策制定者提供了新的途徑,以平衡擴大信貸可獲得性的必要性和抑制債務過度積累的必要性。提出具體建議,以便為包括中國,香港和日本在內的亞太地區主要司法管轄區的法律改革辯論提供信息。
Realisation of objectives: All seven objectives have been achieved. As noted in mid-term report and in line with the comments received, adjustments to the project were implemented to minimise the impact of COVID-19 on both the scheduled activities and the research without departing from the main objectives. Regarding the activities, traveling has been postponed and concentrated in February-July 2022 (Columbia Law School, World Bank, and UNIDROIT); an additional research trip has been conducted in October 2022 (National University of Singapore, Faculty of Law). This plan was facilitated by the teaching relief and created synergies between ground research, outreach and dissemination activities. Nonetheless, the project had to face the increased costs of traveling, requiring adjustments to the budget allocated for RA, with less than a 20% deviation in compliance with HKU and RGC policies. Throughout the project, the PI and the Co-PI worked in coordination, engaging in research meetings and presenting their research to scholars and policymakers remotely. With respect to the research, the project had to take into account the renewed role of credit, regulation, and technology during COVID-19. Notably, the adverse economic impact of COVID-19 was primarily averted through the implementation of exceptional public measures to ease access to credit, further highlighting the importance of coordination between different branches of the law and the role of technology. As the process of creating credit through law reforms took new, still unfolding, directions, the project continued the planned analysis and monitored the developments in order to produce publications and policy recommendations in areas that became relevant for scholars and policymakers. This approach ensured the attainment of all objectives, as illustrated next. 1. Systematically analyse the processes of reforming secured transactions laws; when those are guided by international soft-laws. The analysis focused on understanding how the impact of exceptional measures and the accelerated digitalisation process changed fundamental variables within the law reform framework. The outcomes of this analysis fed, as planned, the second objective and have been presented at the National University of Singapore, Faculty of Law with a working paper titled “Post-COVID19 Recovery Through Law: Credit, Regulation, and Technology”; whereas the analysis of the connection between international soft-laws and access to credit has been accepted for publication in the Elgar Companion to UNIDROIT (Output 5). 2. Isolate common patterns and key issues affecting the creation of credit through law reforms. Common patterns were isolated, leading to identify two fundamental coordination issues: (i) private law and regulatory rules governing the extension of credit; and (ii) the emergence of ad hoc regulatory regimes governing data and data flows and access to credit policies. The analysis of these issues has been further expanded in Output 1, introducing the notion of Commercial Law Intersection, as well as in Output 3 and in Output 4, offering a comparative analysis of the legal and regulatory reforms promoting inclusive access to credit in China, India, the European Union, and the United States. 3. Shed new light on the tension between access to credit and financial stability. The tension between access to credit and financial stability has been explored through a new analytical framework, developed in three phases and contained in different policy-focused outputs. First, at the beginning of the project, the problematic tension between access to credit and financial stability has been presented at the III Conference on International Coordination of Secured Transactions Law Reforms (February 2020, Cartagena, Colombia), organised by the World Bank Group and by Esternado University. As the research progressed, the CLI theory (Output 1) has shown that the tension between access to credit and financial stability can be ascribed to the lack of coordination between legal and regulatory rules. This new perspective has been presented at the European Central Bank (ECB): Directorate General on Macro-Prudential Supervision Seminar Series, in June 2021. Finally, the applicability of the CLI theory to shed new light on the tension between access to credit and financial stability has been also noted in a policy paper issued by the International Finance Corporation (IFC) of the World Bank Group on the coordination between secured transactions law reforms (enacted to promote access to credit) and prudential regulation (enacted to support financial stability). 4. Assess the impact of new technologies on domestic legal and regulatory frameworks. This assessment has demonstrated that domestic policymakers are establishing their sovereignty on data and data flows through the enactment of new regulatory measures. With specific attention to China, the European Union, and the United States, Output 3 demonstrates that the measures adopted in each jurisdiction reflect patterns of specific cultural, political, economic, and legal characteristics. The result is the emergence of a global data governance framework that is transnational in nature by increasingly fragmented. This analysis complements the findings contained in Output 1 (CLI) and Output 4 (Financial Data Governance), as the implementation of new technologies to promote inclusive access to credit is dependent on the existence of suitable regulatory regimes governing data, domestically and internationally. 5. Distil policy suggestions addressing the needs of jurisdictions in the Asia Pacific region. Policy suggestions have been contained in all published research and presentations. While Output 1 presents a novel solution to resolve coordination issues in any jurisdiction, the other outputs have focused on the Asia Pacific region. Output 2 examines the Japanese experience to indicate that coordination between regulatory measures (public guarantee schemes) and secured transactions law is key to ensuring inclusive access to credit; Output 3 advances a solution to allow the circulation of data within regional boundaries, having in view the regional influence of China; whereas Output 4 presents recommendations in consideration of the needs of China and India to promote digital financial inclusion. Moreover, policy recommendations have been distilled through a series of papers delivered at (i) the UNCITRAL conference (Macau and Shanghai, December 2021) on Conquering the COVID: Enhancing Economic Recovery through Harmonization of Law Governing MSMEs, (ii) APEC meeting (Tokyo, May 2022) on Modernizing Secured Transactions Legal Regimes in APEC Economies through International Instruments and Effective Dispute Resolution Mechanisms; and (iii) IFC conference (Ho Chi Minh, December 2022) on International Best Practices on Secured Transactions Enforcement. 6. Produce a book for publication in a reputable university press or, alternatively, produce two articles for submission to top-tier law journals. Owing to the impact of COVID-19 on the creation of credit and in consideration of the unfolding perils related to excessive indebtedness, it was preferred to produce two substantive articles (over 50 pages each). Both articles (Output 1 and Output 4) were published in the Hastings Law Journal (University of California) which is ranked “A” by the Israeli Inter-university Committee Ranking of Legal Publications of 2021. 7. Produce an additional article for submission to a top-tier law journal. An additional article was published in the Berkeley Technology Law Journal (2023) (Output 3), ranked as “A” by the Israeli Inter-university Committee. Furthermore, an article was published in the Butterworths Journal of International Banking and Financial Law (2021) (Output 2), a journal widely circulating among policymakers and practitioners; and a book chapter will be published in the Elgar Companion to UNIDROIT (Output 5), a point of reference for the study of international instruments promoting access to credit.
Summary of objectives addressed:
Objectives Addressed Percentage achieved
1.Systematically analyse the processes of reforming secured transaction laws; when those are guided by international soft-laws.Yes100%
2.Isolate common patterns and key issues affecting the creation of credit through law reforms.Yes100%
3.Shed new light on the tension between access to credit and financial stability.Yes100%
4.Assess the impact of new technologies on domestic legal and regulatory frameworks.Yes100%
5.Distil policy suggestions addressing the needs of jurisdictions in the Asia Pacific region.Yes100%
6.Produce a book for publication in a reputable university press or, alternatively, produce two articles for submission to top-tier law journals.Yes100%
7.Produce an additional article for submission to a top-tier law journal.Yes100%
Research Outcome
Major findings and research outcome: The major findings of this research can be regrouped into three areas. 1. New theory to understand and resolve policy tensions. Output 1 introduced a novel theoretical framework, the CLI theory, to explain why coordination issues between law and regulation emerge and how they can be addressed by lawmakers (domestically and internationally) and interpreters (such as courts and regulators). The theory has been presented at (i) the University College of London, Faculty of Law, and (ii) at the University of Zurich, Faculty of Law, within the University’s Research Priority Programme in Financial Regulation. The potential impact of this contribution is evidenced by the interest of international policymakers - such as the ECB and UNCITRAL - and by the direct citations in three policy papers issued by the World Bank Group. 2. Identification of new dynamics to explain the relationship between technology, regulation, and inclusive access to credit and predict the role of regulation. Output 3 identifies a series of variables to demonstrate that the domestic approaches deployed to govern the digital domain define specific “data governance styles”. Output 4 builds on this understanding to introduce the notion of “financial data governance” defining the intersection between financial regulation, new regulatory policies promoting open banking, and data governance styles. With specific attention to China, India, the EU, and the US, these outputs offer three main contributions by (i) mapping regulatory trajectories vis-à-vis technology, (ii) isolating the impact on financial inclusion and access to credit, and (iii) offering solutions to address international and domestic coordination issues. The research has been presented at (i) the Graduate School of Law of Nagoya University (November 2021); and (ii) the 50th Anniversary Conference of the Ecole Polytechnique of Paris (February 2022). 3. Policy suggestions to promote inclusive access to credit. To complete the analysis with specific policy suggestions, two additional outputs have been completed. Output 2 draws from the Japanese experience to examine how public guarantee programmes affect secured transactions law reforms, suggesting specific solutions to ensure their harmonious interaction. Output 5 examines the role of UNIDROIT instruments to promote access to credit. In particular, this publication indicates that UNIDROIT instruments should further evolve to promote coordination with different areas of the law, such as regulation and insolvency law. These findings and related recommendations have been presented at international conferences with an Asia Pacific focus organised by UNCITRAL and APEC.
Potential for further development of the research
and the proposed course of action:
This project has opened new research avenues. First, the connection between pandemic-related regulatory policies and credit creation needs to be further studied as emergency measures are phased out and a new paradigm to promote growth through law emerges. Second, the mechanisms to ensure coordination at the international level among different standard-setters require deeper studies, to suggest a reconfiguration of the current global governance framework addressing the risks of digitalised finance and curbing an uncontrolled expansion of credit. Finally and more broadly, as credit expansion engenders an accumulation of debt, deeper analyses are required to understand the legal and regulatory framework protecting the financial system from impending crises. These aspects should be addressed through new and different research projects. Taking as a point of reference the last area for further development, the PI has prepared and submitted a new GRF proposal (Ref. 17610623) to examine the governance of financial systemic risks vis-à-vis emerging sustainability crises. In consideration of the current banking crises, connected to the expansion of debt, such a proposal complements the findings of this (completed) project on credit creation by looking at systemic risk – an aspect that was not part of this project.
Layman's Summary of
Completion Report:
Inclusive access to credit is of paramount importance to reducing poverty and stimulating economic recovery. Yet, the legal approaches used by policymakers to achieve these goals have evolved. Traditionally, ambitious law reforms have been enacted to support access to credit by facilitating the use of collateral. More recently, policymakers have opted for approaches promoting the extension of credit more rapidly through (i) direct regulatory interventions, and (ii) digital means. Through qualitative and comparative analyses, this project demonstrates that traditional and novel approaches must address a fundamental problem of coordination within and among different branches of the law. Through this prism, it is shown that a lack of coordination between law and regulation fuels the tension between otherwise compatible policy goals, namely, financial stability and access to credit. Moreover, contrary to common perceptions, this research indicates that the diffusion of new technologies has heightened coordination problems, given that new and conflicting regulatory regimes have been enacted in different jurisdictions to govern the data flows underpinning any financial transaction. By providing a novel method to resolve these issues, the research significance has been evidenced by its broad applicability leading to distil specific suggestions, acknowledged internationally organisations and in the Asia-Pacific region.
Research Output
Peer-reviewed journal publication(s)
arising directly from this research project :
(* denotes the corresponding author)
Year of
Publication
Author(s) Title and Journal/Book Accessible from Institution Repository
2021 Giuliano G. Castellano* and Andrea Tosato  Commercial Law Intersections  Yes 
2021 M. Dubovec* and M. Hara  M. Dubovec and M. Hara, Effects of Credit Guarantee Schemes on Secured transactions Frameworks, (2021),  No 
2023 Douglas W. Arner, Giuliano G. Castellano,* Eriks K. Selga  The Transnational Data Governance Problem  Yes 
2023 Douglas W. Arner, Giuliano G. Castellano,* Eriks K. Selga  Financial Data Governance  Yes 
Giuliano G. Castellano* and Marek Dubovec  UNIDROIT Access to Credit Instruments  No 
Recognized international conference(s)
in which paper(s) related to this research
project was/were delivered :
Month/Year/City Title Conference Name
Cartagena, Colombia Coordinating Secured Transactions Law and Prudential Regulation to Stimulate Access to Credit  III Conference on International Coordination of Secured Transactions Law Reforms: Advancing Reforms Globally and in Latin America Through Enhanced Coordination 
London Commercial Law Intersections: Challenges for Law & Development  Seminars in Commercial Law, University College of London (UCL), Faculty of Law (London, U.K.) 
Zurich The Fragmentation of Commercial Law  University of Zurich, Faculty of Law, Research Priority Programme in Financial Regulation 
Frankfurt Secured Lending: Coordinating Law Reforms and Regulatory Policies  European Central Bank (ECB): Directorate General on Macro-Prudential Supervision Seminar Series 
Singapore Post-COVID19 Recovery Through Law: Credit, Regulation, and Technology  Seminar Series of Centre for Banking and Financial Law (CBFL), Faculty of Law, National University of Singapore 
Tokyo Regulatory Governance, Access to Credit, and Digital Transformation: Towards a New Phase for Law and Development  Workshop on Modernizing Secured Transactions Legal Regimes in APEC Economies through International Instruments and Effective Dispute Resolution Mechanisms 
Nagoya Access to Credit in the Digital Era: Law, Regulation, and Blockchain  Decolonizing Arbitration Lecture Series, Graduate School of Law, Nagoya University 
Macau Access to Credit and Receivables Finance: A Post-COVID-19 Roadmap  Conquering the COVID: Enhancing Economic Recovery through Harmonization of Law Governing MSMEs, UNCITRAL-RCAP and the Faculty of Law, University of Macau, and the World Trade Center Macau Arbitration Center and Shanghai Arbitration Commission 
Paris Governing Technology: Wicked Problems, Regulatory Issues, and Opportunities  50th Anniversary Conference, Centre de Recherche en Gestion (CRG), Ecole Polytechnique, Paris 
Ho Chi Minh Secured Transactions Law Reforms: Enforcement and Regulatory Considerations  International Best Practices on Secured Transactions Enforcement 
Other impact
(e.g. award of patents or prizes,
collaboration with other research institutions,
technology transfer, etc.):

  SCREEN ID: SCRRM00542