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Post-crisis challenges to bank regulation

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  • Xavier Freixas

Abstract

"The current crisis has totally transfigured the world's financial landscape. The lessons we have derived have also transformed our perception of banking risks, contagion and its implication for banking regulation. It is now well established that risks were mispriced, accumulated in neuralgic points of the financial system, were amplified by procyclical regulation and the instability and fragility of financial institutions. Yet the implications on the design of post-crisis banking regulation are unclear. In this article we summarize the key issues the new regulatory framework have to consider and how they relate to one another. As the debate over the new financial regulation architecture has evolved, two different views seem to emerge: one views banking crises as an unavoidable phenomenon, so that regulation should provide a framework to cope with its impact. The other considers that crisis could be avoided provided banking regulation is duly modified. We argue that for consistency reasons choosing one view or the other leads to a completely different perspective on the future of banking regulation, as it implies a different view on the banking industry, bank stakeholders' rights, banks' corporate governance and contagion. As a consequence, choosing the incorrect view of banking crises may lead to an inefficient banking industry." Copyright (c) CEPR, CES, MSH, 2010.

Suggested Citation

  • Xavier Freixas, 2010. "Post-crisis challenges to bank regulation," Economic Policy, CEPR;CES;MSH, vol. 25, pages 375-399, April.
  • Handle: RePEc:bla:ecpoli:v:25:y:2010:i::p:375-399
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    Cited by:

    1. Tamgac, Unay, 2011. "Crisis and self-fulfilling expectations: The Turkish experience in 1994 and 2000-2001," International Review of Economics & Finance, Elsevier, vol. 20(1), pages 44-58, January.
    2. Ulrich Suntum & Cordelius Ilgmann, 2013. "Bad banks: a proposal based on German financial history," European Journal of Law and Economics, Springer, vol. 35(3), pages 367-384, June.
    3. repec:eee:spacre:v:17:y:2014:i:1:p:58-70 is not listed on IDEAS
    4. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.
    5. repec:eee:glofin:v:35:y:2018:i:c:p:202-222 is not listed on IDEAS
    6. Uribe Gil, Jorge Mario & Ulloa Villegas, Inés Maria, 2012. "La medición del riesgo en eventos extremos. Una revisión metodológica en contexto," REVISTA LECTURAS DE ECONOMÍA, UNIVERSIDAD DE ANTIOQUIA - CIE, June.
    7. repec:eee:finsta:v:30:y:2017:i:c:p:229-239 is not listed on IDEAS
    8. Haucap, Justus & Heimeshoff, Ulrich & Uhde, André, 2010. "Zur Neuregulierung des Bankensektors nach der Finanzkrise: Bewertung der Reformvorhaben der EU aus ordnungspolitischer Sicht," DICE Ordnungspolitische Perspektiven 02, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    9. Michael Diemer & Uwe Vollmer, 2015. "What makes banking crisis resolution difficult? Lessons from Japan and the Nordic Countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 251-277, December.

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