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Banking Regulation and Systemic Risk

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Author Info
Martin Summer () (Oesterreichische Nationalbank, Economic Studies Division)

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

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Length: 42 pages
Date of creation: 07 Jan 2002
Date of revision:
Handle: RePEc:onb:oenbwp:57

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Postal: Oesterreichische Nationalbank, Economic Studies Division, c/o Beate Hofbauer-Berlakovich, POB 61, A-1011 Vienna, Austria
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Related research
Keywords: Banking Regulation; Systemic Risk; Banking Crises;

Other versions of this item:

Find related papers by JEL classification:
G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Mortgages
K23 - Law and Economics - - Regulation and Business Law - - - Regulated Industries and Administrative Law
L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

This paper has been announced in the following NEP Reports:

References listed on IDEAS
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.:
  1. Dirk Schoenmaker, 1992. "Institutional Separation between Supervisory and Monetary Agencies," FMG Special Papers sp52, Financial Markets Group. [Downloadable!] (restricted)
  2. 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. [Downloadable!] (restricted)
    Other versions:
  3. Markus Staub, 1998. "Inter-Banken-Kredite und systemisches Risiko," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 134(II), pages 193-230, June. [Downloadable!]
  4. C. H. Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," BIS Working Papers 70, Bank for International Settlements. [Downloadable!]
  5. Aghion, Philippe & Bolton, Patrick, 1992. "An Incomplete Contracts Approach to Financial Contracting," Review of Economic Studies, Blackwell Publishing, vol. 59(3), pages 473-94, July. [Downloadable!] (restricted)
  6. Carlsson, Hans & van Damme, Eric, 1993. "Global Games and Equilibrium Selection," Econometrica, Econometric Society, vol. 61(5), pages 989-1018, September. [Downloadable!] (restricted)
    Other versions:
  7. Franklin Allen & Douglas Gale, 2001. "Financial Contagion," Journal of Political Economy, University of Chicago Press, vol. 108(1), pages 1-33, February. [Downloadable!] (restricted)
    Other versions:
  8. V.V. Chari & Ravi Jagannathan, 1984. "Banking Panics," Discussion Papers 618, Northwestern University, Center for Mathematical Studies in Economics and Management Science. [Downloadable!]
  9. Merton, Robert C, 1974. "On the Pricing of Corporate Debt: The Risk Structure of Interest Rates," Journal of Finance, American Finance Association, vol. 29(2), pages 449-70, May. [Downloadable!] (restricted)
    Other versions:
  10. Pradeep Dubey & John Geanakoplos & Martin Shubik, 2000. "Default in a General Equilibrium Model with Incomplete Markets," Cowles Foundation Discussion Papers 1247, Cowles Foundation, Yale University. [Downloadable!]
  11. Aghion, Philippe & Bolton, Patrick & Dewatripont, Mathias, 2000. "Contagious bank failures in a free banking system," European Economic Review, Elsevier, vol. 44(4-6), pages 713-718, May. [Downloadable!] (restricted)
  12. Hellwig, Martin, 1994. "Liquidity provision, banking, and the allocation of interest rate risk," European Economic Review, Elsevier, vol. 38(7), pages 1363-1389, August. [Downloadable!] (restricted)
  13. Kim, Daesik & Santomero, Anthony M, 1988. " Risk in Banking and Capital Regulation," Journal of Finance, American Finance Association, vol. 43(5), pages 1219-33, December. [Downloadable!] (restricted)
  14. Jean-Charles Rochet & Jean Tirole, 1996. "Interbank lending and systemic risk," Proceedings, Board of Governors of the Federal Reserve System (U.S.), pages 733-765.
    Other versions:
  15. 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. [Downloadable!] (restricted)
  16. Thomas Gehrig, 1996. "Market Structure, Monitoring and Capital Adequacy Regulation," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(IV), pages 685-702, December. [Downloadable!]
  17. Calem, Paul & Rob, Rafael, 1999. "The Impact of Capital-Based Regulation on Bank Risk-Taking," Journal of Financial Intermediation, Elsevier, vol. 8(4), pages 317-352, October. [Downloadable!] (restricted)
  18. Bhattacharya, Sudipto & Boot, Arnoud W A & Thakor, Anjan V, 1998. "The Economics of Bank Regulation," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 30(4), pages 745-70, November.
    Other versions:
  19. repec:fip:fedreq:y:1975:i:jan:p:2-9:n:v.61no.1 is not listed on IDEAS
  20. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23. [Downloadable!]
    Other versions:
  21. 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. [Downloadable!]
  22. Craig Furfine, 1999. "Interbank exposures: quantifying the risk of contagion," Proceedings, Federal Reserve Bank of Chicago, issue May, pages 313-328.
  23. Hellwig, Martin, 1998. "Systemische Risiken im Finanzsektor," Sonderforschungsbereich 504 Publications 98-30, Sonderforschungsbereich 504, Universität Mannheim & Sonderforschungsbereich 504, University of Mannheim.
Full references

Cited by:
(explanations, 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.)

  1. Michael Boss & Martin Summer & Stefan Thurner, 2004. "Contagion Flow Through Banking Networks," Quantitative Finance Papers cond-mat/0403167, arXiv.org. [Downloadable!]
  2. Martin Summer & Helmut Elsinger & Alfred Lehar, 2002. "Risk Assessment for Banking Systems," Working Papers 79, Oesterreichische Nationalbank (Austrian Central Bank). [Downloadable!]
  3. Shirley HO, 2004. "Evolutionary Forces in a Banking System with Speculation and System Risk," Econometric Society 2004 Far Eastern Meetings 692, Econometric Society. [Downloadable!]
  4. 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. [Downloadable!]
  5. 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. [Downloadable!]
  6. Sudipto Bhattacharya & Charles A. E. Goodhart & Pojanart Sunirand & Dimitrios P. Tsomocos, 2006. "Banks, Relative Performance, and Sequential Contagion," OFRC Working Papers Series 2006fe10, Oxford Financial Research Centre. [Downloadable!]
    Other versions:
  7. Gianni De Nicoló & Philip F. Bartholomew & Jahanara Zaman & M. G. Zephirin, 2003. "Bank Consolidation, Internationalization and Conglomeration: Trends and Implications for Financial Risk," IMF Working Papers 03/158, International Monetary Fund. [Downloadable!]
  8. 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. [Downloadable!] (restricted)
  9. Phong T. H. Ngo, 2006. "International Prudential Regulation, Regulatory Risk and the Cost of Bank Capital," ANUCBE School of Economics Working Papers 2006-463, Australian National University, College of Business and Economics, School of Economics. [Downloadable!]
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This page was last updated on 2009-11-19.

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