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Financial re-regulation at a crossroads: How the European experience strengthens the case for a radical reform built on Minsky's approach

  • Mario Tonveronachi

    ()

    (University of Siena)

  • Elisabetta Montanaro

    ()

    (University of Siena)

Registered author(s):

    The current financial and sovereign crisis is pushing European politicians and EU bureaucrats to devise new institutional and policy solutions. However, the new EU institutional framework and stricter regulatory requirements do not introduce significant changes in the laissez-faire nature of the regulatory approach. Our opinion is that the entire re-regulation process does not go to the roots of how financial fragility endogenously accumulates, and how finally it produces a crisis each time starting from the weakest part of the financial system. Analysing the European banking sectors from this perspective, we show how domestic specificities add to the limits due to risk-based regulation and supervision. We then build on Minskys regulatory proposals to present the skeleton of a simple alternative to the existing regulatory approach.

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    File URL: http://ojs.uniroma1.it/index.php/PSLQuarterlyReview/article/view/10194/10083
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    Article provided by Economia civile in its journal PSL Quarterly Review.

    Volume (Year): 65 (2012)
    Issue (Month): 263 ()
    Pages: 335-383

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    Handle: RePEc:psl:pslqrr:2012:41
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    1. André Sapir & Jean Pisani-Ferry & Guntram Wolff, 2012. "The Messy Rebuilding of Europe," ULB Institutional Repository 2013/174289, ULB -- Universite Libre de Bruxelles.
    2. Martin Hellwig, 2010. "Capital Regulation after the Crisis: Business as Usual?," CESifo DICE Report, Ifo Institute for Economic Research at the University of Munich, vol. 8(2), pages 40-46, 07.
    3. Alessandro Roncaglia, 2012. "Keynesian uncertainty and the shaky foundations of statistical risk assessment models," PSL Quarterly Review, Economia civile, vol. 65(263), pages 437-454.
    4. Carmassi, Jacopo & Micossi, Stefano, 2012. "Time to Set Banking Regulation Right," CEPS Papers 6734, Centre for European Policy Studies.
    5. Hyun Song Shin, 2009. "Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis," Journal of Economic Perspectives, American Economic Association, vol. 23(1), pages 101-19, Winter.
    6. Gros, Daniel, 2012. "Macroeconomic Imbalances in the Euro Area: Symptom or cause of the crisis?," CEPS Papers 6865, Centre for European Policy Studies.
    7. Julian T. S. Chow & Jay Surti, 2011. "Making Banks Safer; Can Volcker and Vickers Do it?," IMF Working Papers 11/236, International Monetary Fund.
    8. Jean Pisani-Ferry & André Sapir & Nicolas Véron & Guntram B. Wolff, 2012. "What kind of European banking union?," Policy Contributions 731, Bruegel.
    9. Mario Tonveronachi & Elisabetta Montanaro, 2009. "Some preliminary proposals for re-regulating financial systems," Department of Economics University of Siena 553, Department of Economics, University of Siena.
    10. Tobias Adrian & Hyun Song Shin, 2008. "Liquidity and leverage," Staff Reports 328, Federal Reserve Bank of New York.
    11. Dirk Schoenmaker & Charles Goodhart, 2006. "Burden Sharing in a Banking Crisis in Europe," FMG Special Papers sp164, Financial Markets Group.
    12. Jan Kregel, 2011. "Will restricting proprietary trading and stricter derivatives regulation make the US financial system more stable?," PSL Quarterly Review, Economia civile, vol. 64(258), pages 227-247.
    13. Jacopo Carmassi & Stefano Micossi, 2012. "Time to Set Banking Regulation Right," FMG Special Papers sp206, Financial Markets Group.
    14. Robert A. Eisenbeis & George G. Kaufman, 2007. "Cross-border banking: challenges for deposit insurance and financial stability in the European Union," Working Paper 2006-15, Federal Reserve Bank of Atlanta.
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