Abstract: Unlike many other areas of regulation, financial regulation operates in the context of a complex interdependent system. The interconnections among firms, markets, and legal rules have implications for financial regulatory policy, especially the choice between ex ante regulation aimed at preventing financial failure and ex post regulation aimed at responding to that failure. Regulatory theory has paid relatively little attention to this distinction. Were regulation to consist solely of duty-imposing norms, such neglect might be defensible. In the context of a system, however, regulation can also take the form of interventions aimed at mitigating the potentially systemic consequences of a financial failure. We show that this dual role of financial regulation implies that ex ante regulation and ex post regulation should be balanced in setting financial regulatory policy, and we offer guidelines for achieving that balance.