Regulating Systemic Institutions
AbstractThe subprime crisis has revealed many loopholes in the supervisory/regulatory framework for banks. The most dramatic of these loopholes is certainly the Too Big To Fail (TBTF) problem: As a consequence of the way central banks and Treasuries have managed the crisis, any large financial institution that encounters financial problems in the future can expect to be bailed out by public authorities on the ground that its resolution could provoke a systemic crisis. This article proposes a solution to the TBTF problem, based on an Industrial Organization approach. Instead of simply downsizing large financial institutions or imposing stricter regulations based on newly developed measures of systemic risk exposures, I propose to reform in depth the organization of interbank and money markets.
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Bibliographic InfoArticle provided by Finnish Economic Association in its journal Finnish Economic Papers.
Volume (Year): 22 (2009)
Issue (Month): 2 (Autumn)
Other versions of this item:
- Rochet, Jean-Charles, 2009. "Regulating Systemic Institutions," Open Access publications from University of Toulouse 1 Capitole http://neeo.univ-tlse1.fr, University of Toulouse 1 Capitole.
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Jean-Charles Rochet & Jean Tirole, 1996.
"Interbank lending and systemic risk,"
Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
- Frederic S. Mishkin, 2005. "How Big a Problem is Too Big to Fail?," NBER Working Papers 11814, National Bureau of Economic Research, Inc.
- Goodhart, Charles & Schoenmaker, Dirk, 1995. "Should the Functions of Monetary Policy and Banking Supervision Be Separated?," Oxford Economic Papers, Oxford University Press, vol. 47(4), pages 539-60, October.
- Donald P. Morgan & Kevin J. Stiroh, 2005. "Too big to fail after all these years," Staff Reports 220, Federal Reserve Bank of New York.
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