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On systemically important financial institutions and progressive systemic mitigation

Author

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  • James B. Thomson

Abstract

One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically important and to give them more time-consistent incentives. It defines criteria for classifying firms as systemically important: size (the classic doctrine of too big to let fail) and the four C’s of systemic importance (contagion, concentration, correlation, and conditions); it also discusses the concept of progressive systemic mitigation.

Suggested Citation

  • James B. Thomson, 2009. "On systemically important financial institutions and progressive systemic mitigation," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Aug.
  • Handle: RePEc:fip:fedcpd:y:2009:i:aug:n:27
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    File URL: http://www.clevelandfed.org/research/policydis/pdp27.pdf
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    Citations

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    Cited by:

    1. Mahir Binici & Bulent Koksal & Cuneyt Orman, 2013. "Stock Return Co-movement and Systemic Risk in the Turkish Banking System," Central Bank Review, Research and Monetary Policy Department, Central Bank of the Republic of Turkey, vol. 13(Special I), pages 41-63.
    2. Mikhail V. Oet, 2012. "Comment on "Liquidity Risk, Cash Flow Constraints, and Systemic Feedbacks"," NBER Chapters,in: Quantifying Systemic Risk, pages 61-71 National Bureau of Economic Research, Inc.
    3. Moenninghoff, Sebastian C. & Ongena, Steven & Wieandt, Axel, 2015. "The perennial challenge to counter Too-Big-to-Fail in banking: Empirical evidence from the new international regulation dealing with Global Systemically Important Banks," Journal of Banking & Finance, Elsevier, vol. 61(C), pages 221-236.
    4. Garry J. Schinasi & Edwin M. Truman, 2010. "Reform of the Global Financial Architecture," Working Paper Series WP10-14, Peterson Institute for International Economics.
    5. Patro, Dilip K. & Qi, Min & Sun, Xian, 2013. "A simple indicator of systemic risk," Journal of Financial Stability, Elsevier, vol. 9(1), pages 105-116.
    6. Oet, Mikhail V. & Bianco, Timothy & Gramlich, Dieter & Ong, Stephen J., 2013. "SAFE: An early warning system for systemic banking risk," Journal of Banking & Finance, Elsevier, vol. 37(11), pages 4510-4533.
    7. Nicolas Véron & Morris Goldstein, 2011. "Too big to fail: the transatlantic debate," Working Papers 495, Bruegel.
    8. Karunagaran A, 2012. "Inter-connectedness of Banks and NBFCs in India: Issues and Policy Implications," Working Papers id:4692, eSocialSciences.
    9. Jiri Podpiera & Inci Ötker, 2010. "The Fundamental Determinants of Credit Default Risk for European Large Complex Financial Institutions," IMF Working Papers 10/153, International Monetary Fund.
    10. Co-Pierre Georg & Jenny Poschmann, 2010. "Systemic risk in a network model of interbank markets with central bank activity," Jena Economic Research Papers 2010-033, Friedrich-Schiller-University Jena.

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