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On systemically important financial institutions and progressive systemic mitigation

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  • James B. Thomson

Abstract

One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically important and to give them more time-consistent incentives. It defines criteria for classifying firms as systemically important: size (the classic doctrine of too big to let fail) and the four C’s of systemic importance (contagion, concentration, correlation, and conditions); it also discusses the concept of progressive systemic mitigation.

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Bibliographic Info

Article provided by Federal Reserve Bank of Cleveland in its journal Policy Discussion Papers.

Volume (Year): (2009)
Issue (Month): Aug ()
Pages:

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Handle: RePEc:fip:fedcpd:y:2009:i:aug:n:27

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Keywords: Systemic risk ; Financial stability ; Financial institutions;

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Cited by:
  1. Co-Pierre Georg & Jenny Poschmann, 2010. "Systemic risk in a network model of interbank markets with central bank activity," Jena Economic Research Papers 2010-033, Friedrich-Schiller-University Jena, Max-Planck-Institute of Economics.
  2. Mahir Binici & Bulent Koksal & Cuneyt Orman, 2013. "Stock Return Co-movement and Systemic Risk in the Turkish Banking System," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 13(Special I), pages 41-63.
  3. Garry J. Schinasi & Edwin M. Truman, 2010. "Reform of the Global Financial Architecture," Working Paper Series WP10-14, Peterson Institute for International Economics.
  4. Karunagaran A, 2012. "Inter-connectedness of Banks and NBFCs in India: Issues and Policy Implications," Working Papers id:4692, eSocialSciences.
  5. Jiri Podpiera & Inci Ötker, 2010. "The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions," IMF Working Papers 10/153, International Monetary Fund.
  6. Mikhail V. Oet & Ryan Eiben & Timothy Bianco & Dieter Gramlich & Stephen J. Ong & Jing Wang, 2011. "SAFE: An early warning system for systemic banking risk," Working Paper 1129, Federal Reserve Bank of Cleveland.
  7. Morris Goldstein & Nicolas Veron, 2011. "Too Big to Fail: The Transatlantic Debate," Working Paper Series WP11-2, Peterson Institute for International Economics.
  8. Mikhail Oet, 2012. "Comment on "Liquidity Risk, Cash Flow Constraints, and Systemic Feedbacks"," NBER Chapters, in: Quantifying Systemic Risk, pages 61-71 National Bureau of Economic Research, Inc.
  9. Patro, Dilip K. & Qi, Min & Sun, Xian, 2013. "A simple indicator of systemic risk," Journal of Financial Stability, Elsevier, vol. 9(1), pages 105-116.
  10. Oet, Mikhail V. & Bianco, Timothy & Gramlich, Dieter & Ong, Stephen J., 2013. "SAFE: An early warning system for systemic banking risk," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4510-4533.

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