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Banking Regulation and Systemic Risk

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Abstract

The term Systemic Risk belongs to the standard rhetoric of economic policy discussions related to the banking industry. Besides of the goal of protecting small depositors control of systemic risk is given as one of the main arguments for banking regulation. Various recent financial crises have increasingly focussed the regulatory debate on issues of systemic risk and financial stability. In this paper, however, we argue that there is no generally accepted definition of systemic risk and the effectiveness and the economic consequences of various instruments of banking regulation that are intended to attenuate it are still only partially understood both theoretically and empirically. Furthermore we discuss some of the issues raised in this debate by reviewing recent contributions to the academic literature.

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Bibliographic Info

Paper provided by Oesterreichische Nationalbank (Austrian Central Bank) in its series Working Papers with number 57.

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Date of creation: 07 Jan 2002
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Handle: RePEc:onb:oenbwp:57

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Keywords: Banking Regulation; Systemic Risk; Banking Crises;

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References

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  1. Franklin Allen & Douglas Gale, 2000. "Financial Contagion," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 1-33, February.
  2. Postlewaite, Andrew & Vives, Xavier, 1987. "Bank Runs as an Equilibrium Phenomenon," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 485-91, June.
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  7. Freixas, Xavier & Parigi, Bruno M & Rochet, Jean-Charles, 2000. "Systemic Risk, Interbank Relations, and Liquidity Provision by the Central Bank," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 32(3), pages 611-38, August.
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  14. Acharya, Viral V., 2009. "A Theory of Systemic Risk and Design of Prudential Bank Regulation," CEPR Discussion Papers 7164, C.E.P.R. Discussion Papers.
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  17. Mathias Dewatripont & Philippe Aghion & Patrick Bolton, 2000. "Contagious bank failures in a free banking system," ULB Institutional Repository 2013/9737, ULB -- Universite Libre de Bruxelles.
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  22. Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group.
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  24. Dow, James, 2000. "What Is Systemic Risk? Moral Hazard, Initial Shocks, and Propagation," Monetary and Economic Studies, Institute for Monetary and Economic Studies, Bank of Japan, vol. 18(2), pages 1-24, December.
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Citations

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Cited by:
  1. Elsinger, Helmut & Lehar, Alfred & Summer, Martin, 2002. "Risk Assessment for Banking Systems," Working Papers 79, Oesterreichische Nationalbank (Austrian Central Bank).
  2. Elsinger, Helmut & Summer, Martin & Boss, Michael & Thurner, Stefan, 2004. "An Empirical Analysis of the Network Structure of the Austrian Interbank Market," Financial Stability Report, Oesterreichische Nationalbank (Austrian Central Bank), issue 7.
  3. Schüler, Martin, 2003. "How Do Banking Supervisors Deal with Europe-wide Systemic Risk?," ZEW Discussion Papers 03-03, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
  4. Stéphanie Stolz, 2002. "Banking Supervision in Integrated Financial Markets: Implications for the EU," CESifo Working Paper Series 812, CESifo Group Munich.
  5. International Monetary Fund, 2004. "Toward a Framework for Safeguarding Financial Stability," IMF Working Papers 04/101, International Monetary Fund.
  6. Gianni De Nicoló & M. G. Zephirin & Philip F. Bartholomew & Jahanara Zaman, 2003. "Bank Consolidation, Internationalization and Conglomeration: Trends and Implications for Financial Risk," IMF Working Papers 03/158, International Monetary Fund.
  7. Claeys, Sophie, 2005. "Optimal regulatory design for the Central Bank of Russia," BOFIT Discussion Papers 7/2005, Bank of Finland, Institute for Economies in Transition.
  8. Leonidov, A. & Rumyantsev, E., 2013. "Russian Interbank Systemic Risks Assessment from the Network Topology Point of View," Journal of the New Economic Association, New Economic Association, vol. 19(3), pages 65-80.
  9. Michael Boss & Martin Summer & Stefan Thurner, 2004. "Contagion Flow Through Banking Networks," Papers cond-mat/0403167, arXiv.org.
  10. Garry J. Schinasi, 2009. "Defining Financial Stability and a Framework for Safeguarding It," Working Papers Central Bank of Chile 550, Central Bank of Chile.
  11. Oosterloo, Sander & de Haan, Jakob, 2004. "Central banks and financial stability: a survey," Journal of Financial Stability, Elsevier, vol. 1(2), pages 257-273, December.
  12. Shirley HO, 2004. "Evolutionary Forces in a Banking System with Speculation and System Risk," Econometric Society 2004 Far Eastern Meetings 692, Econometric Society.
  13. Lehar, Alfred, 2005. "Measuring systemic risk: A risk management approach," Journal of Banking & Finance, Elsevier, vol. 29(10), pages 2577-2603, October.
  14. Phong T. H. Ngo, 2006. "International Prudential Regulation, Regulatory Risk and the Cost of Bank Capital," ANU Working Papers in Economics and Econometrics 2006-463, Australian National University, College of Business and Economics, School of Economics.
  15. Jakob Haan & Sander Oosterloo, 2006. "Transparency and accountability of central banks in their role of financial stability supervisor in OECD countries," European Journal of Law and Economics, Springer, vol. 22(3), pages 255-271, November.

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