Advanced Search
MyIDEAS: Login

Is A Less Pro-Cyclical Financial System An Achievable Goal?

Contents:

Author Info

  • Charles Goodhart

    ()
    (Financial Markets Group, London School of Economics)

Registered author(s):

    Abstract

    Banking and finance are inherently pro-cyclical, a condition exacerbated by a combination of Basel II and mark-to-market accounting. But these latter measures have many advantages, so the need is to devise other counter-cyclical macro-prudential policies. This fragility was further enhanced by a decline in bank liquidity (reliance on wholesale funding) and a shift in govenance from partnerships to limited liability public companies. Some commentators have seen the solution to such pro-cyclicality in the guise of direct constraints on bank activity, such as the promotion of 'narrow banking' or limits on bank size. While there are arguments for toughening regulation as systemic risk increases, direct constraints are simplistic; more sensible ideas involve the adoption of better designed macro-prudential regulation, perhaps with some version of banking self-insurance. Quite what the future holds for bank regulation remains, however, to be decided.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
    File URL: http://ner.sagepub.com/content/211/1/R17.abstract
    Download Restriction: no

    Bibliographic Info

    Article provided by National Institute of Economic and Social Research in its journal National Institute Economic Review.

    Volume (Year): 211 (2010)
    Issue (Month): 1 (January)
    Pages: R17-R26

    as in new window
    Handle: RePEc:sae:niesru:v:211:y:2010:i:1:p:r17-r26

    Contact details of provider:
    Postal: 2 Dean Trench Street, Smith Square, London SW1P 3HE
    Phone: +44 (020) 7222 7665
    Fax: +44 (020) 7654 1900
    Web page: http://www.niesr.ac.uk/
    More information through EDIRC

    Related research

    Keywords: Pro-cyclicality; bank regulation; Basel II; mark-to-market; capital adequacy; liquidity; loan-to-value ratios; bankers' remuneration;

    Find related papers by JEL classification:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:sae:niesru:v:211:y:2010:i:1:p:r17-r26. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (SAGE Publications).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.