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Making Banks Safer

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Author Info

  • Julian T. S. Chow
  • Jay Surti
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    Abstract

    This paper assesses proposals to redefine the scope of activities of systemically important financial institutions. Alongside reform of prudential regulation and oversight, these have been offered as solutions to the too-important-to-fail problem. It is argued that while the more radical of these proposals such as narrow utility banking do not adequately address key policy objectives, two concrete policy measures - the Volcker Rule in the United States and retail ring-fencing in the United Kingdom - are more promising while still entailing significant implementation challenges. A risk factor common to all the measures is the potential for activities identified as too risky for retail banks to migrate to the unregulated parts of the financial system. Since this could lead to accumulation of systemic risk if left unchecked, it appears unlikely that any structural engineering will lessen the policing burden on prudential authorities and on the banks.

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    Bibliographic Info

    Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/236.

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    Length: 34
    Date of creation: 01 Oct 2011
    Date of revision:
    Handle: RePEc:imf:imfwpa:11/236

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    Related research

    Keywords: Banks; Bank supervision; Banking; Commercial banks; Risk management; investment banking; hedge; hedging; banking services; financial stability; banking activities; universal banking; retail banking; narrow banking; financial system; deposit insurance; bonds; bank holding; banking sector; banking system; hedge funds; universal bank; hedges; bank holding companies; bank finance companies; financial institutions; moral hazard; banking business; holding company; bank finance; financial services; bank management; financial regulation; hedge fund; asset markets; derivatives markets; capital base; banking operations; banking customers; banking institutions; hedging strategies; mortgage lending; domestic capital; hedging tools; prudential regulation; revenue source; corporate bonds; bank staff; mortgage bonds; derivative; interest rate fluctuations; government bonds; bank for international settlements; banking regulation; bank holding company; domestic capital markets; discounting; banking crisis; banking supervision; financial reform; bank deposits; bank creditors; banking institution; capital adequacy; bank capital; bank branch; banking systems; bank assistance; deposit rate; banking distress; financial statements; interest rate derivatives; banking reform; private banking; financial risk; equity securities; banking license; credit derivatives; equity capital; financial markets;

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    References

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    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.:
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    1. Jonathan Fiechter & Inci Ötker & Anna Ilyina & Michael Hsu & Andre Santos & Jay Surti, 2011. "Subsidiaries or Branches," IMF Staff Discussion Notes 11/04, International Monetary Fund.
    2. Inci Ötker & Aditya Narain & Anna Ilyina & Jay Surti, 2011. "The Too-Important-to-Fail Conundrum," IMF Staff Discussion Notes 11/12, International Monetary Fund.
    3. Pozsar, Zoltan & Adrian, Tobias & Ashcraft, Adam B. & Boesky, Hayley, 2013. "Shadow banking," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-16.
      • Zoltan Pozsar & Tobias Adrian & Adam Ashcraft & Hayley Boesky, 2010. "Shadow banking," Staff Reports 458, Federal Reserve Bank of New York.
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    Cited by:
    1. Mario Tonveronachi & Elisabetta Montanaro, 2012. "Financial re-regulation at a crossroads: How the European experience strengthens the case for a radical reform built on Minsky's approach," PSL Quarterly Review, Economia civile, vol. 65(263), pages 335-383.
    2. Carlo D'Ippoliti, 2012. "Josef Steindl: Introduzione: sulle cause reali della crisi finanziaria (Introduction: on the real causes of the financial crisis)," Moneta e Credito, Economia civile, vol. 65(260), pages 279-292.
    3. Renato Maino, 2012. "Tackling the “Too Big To Fail” conundrum: Integrating market and regulation," FMG Special Papers sp207, Financial Markets Group.
    4. Maylis Avaro & Henri Sterdyniak, 2014. "Banking Union : a solution to the euro zone crisis," Sciences Po publications info:hdl:2441/144pedpca18, Sciences Po.
    5. Edgardo Demaestri & Gustavo Ferro, 2013. "Analysis of the Integration of Financial Regulation and Supervision to the Central Bank," Ensayos Económicos, Central Bank of Argentina, Economic Research Department, vol. 1(68), pages 75-106, June.
    6. repec:spo:wpecon:info:hdl:2441/144pedpca18ff8v7fh3tvnp99m is not listed on IDEAS

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