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The Road to Financial Stability: Capital Regulation, Liquidity Regulation, and Resolution

Author

Listed:
  • Stephen G. Cecchetti

    (Brandeis International Business School, NBER, and CEPR)

Abstract

Prior to the 2007–9 financial crisis, regulations addressing risk taking in the financial system were woefully inadequate. In this essay, I summarize the regulatory changes implemented over the past five years and come to three conclusions. First, as a result of the new Basel III standards, the global financial system is now substantially safer than it was, but probably not yet safe enough. Second, the costs of increasing capital requirements have been much smaller than we originally thought. And third, we are best advised to shy away from time-varying discretionary regulatory policies.

Suggested Citation

  • Stephen G. Cecchetti, 2015. "The Road to Financial Stability: Capital Regulation, Liquidity Regulation, and Resolution," International Journal of Central Banking, International Journal of Central Banking, vol. 11(3), pages 127-139, June.
  • Handle: RePEc:ijc:ijcjou:y:2015:q:3:a:3
    as

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    References listed on IDEAS

    as
    1. Anat Admati & Martin Hellwig, 2013. "The Bankers' New Clothes: What's Wrong with Banking and What to Do about It," Economics Books, Princeton University Press, edition 1, number 9929.
    2. Stephen G. Cecchetti & Marion Kohler, 2014. "When Capital Adequacy and Interest Rate Policy Are Substitutes (And When They Are Not)," International Journal of Central Banking, International Journal of Central Banking, vol. 10(3), pages 205-231, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. How risky are the big U.S. banks?
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2016-10-03 17:58:45

    Citations

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    Cited by:

    1. Jakob Palek & Benjamin Schwanebeck, 2015. "Optimal Monetary and Macroprudential Policy in a Currency Union," MAGKS Papers on Economics 201522, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    2. Yassine Bakkar & Olivier De Jonghe & Amine Tarazi, 2017. "Does banks' systemic importance affect their capital structure and balance sheet adjustment processes?," Working Papers hal-01636253, HAL.
    3. Aikman, David & Haldane, Andrew & Hinterschweiger, Marc & Kapadia, Sujit, 2018. "Rethinking financial stability," Bank of England working papers 712, Bank of England.
    4. Arnould, Guillaume & Dehmej, Salim, 2016. "Is the European banking system robust? An evaluation through the lens of the ECB׳s Comprehensive Assessment," International Economics, Elsevier, vol. 147(C), pages 126-144.
    5. Amin Jan & Maran Marimuthu, 2016. "Bankruptcy Profile of Foreign versus Domestic Islamic Banks of Malaysia: A Post Crisis Period Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 6(1), pages 332-346.
    6. Yassine Bakkar & Olivier De Jonghe & Amine Tarazi, 2017. "Does banks' systemic importance affect their capital structure adjustment process?," Working Papers hal-01546995, HAL.

    More about this item

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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