We model a Systemically Important Financial Institution (SIFI) that is too big (or too interconnected) to fail. Without credible regulation and strong supervision, the shareholders of this institution might deliberately let its managers take excessive risk. We propose a solution to this problem, showing how insurance against systemic shocks can be provided without generating moral hazard. The solution involves levying a systemic tax needed to cover the costs of future crises and more importantly establishing a Systemic Risk Authority endowed with special resolution powers, including the control of bankers' compensation packages during crisis periods.
|Date of creation:||Jun 2012|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: +34 93 542-1222
Fax: +34 93 542-1223
Web page: http://www.barcelonagse.eu
More information through EDIRC
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.:
- Ilhyock Shim, 2006.
"Dynamic prudential regulation: Is prompt corrective action optimal?,"
BIS Working Papers
206, Bank for International Settlements.
- Ilhyock Shim, 2011. "Dynamic Prudential Regulation: Is Prompt Corrective Action Optimal?," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(8), pages 1625-1661, December.
- Biais, Bruno & Mariotti, Thomas & Plantin, Guillaume & Rochet, Jean-Charles, 2004.
"Dynamic Security Design,"
CEPR Discussion Papers
4753, C.E.P.R. Discussion Papers.
- Narayana R Kocherlakota & Ilhyock Shim, 2005.
"Forbearance and Prompt Corrective Action,"
784828000000000512, UCLA Department of Economics.
- Ilhyock Shim & Narayana Kocherlakota, 2005. "Forbearance and prompt corrective action," BIS Working Papers 177, Bank for International Settlements.
- Narayana Kocherlakota & Ilhyock Shim, 2005. "Forbearance and Prompt Corrective Action," 2005 Meeting Papers 324, Society for Economic Dynamics.
- Narayana Kocherlakota & Ilhyock Shim, 2005. "Forbearance and Prompt Corrective Action," Levine's Bibliography 666156000000000532, UCLA Department of Economics.
- J. Thomas & T. Worrall, 2010. "Income Fluctuations and Asymmetric Information: An Example of the Repeated Principal Agent Problem," Levine's Working Paper Archive 2077, David K. Levine.
- Biais, Bruno & Mariotti, Thomas & Rochet, Jean-Charles & Villeneuve, Stéphane, 2007.
"Large Risks, Limited Liability and Dynamic Moral Hazard,"
IDEI Working Papers
472, Institut d'Économie Industrielle (IDEI), Toulouse, revised Sep 2009.
- Bruno Biais & Thomas Mariotti & Jean-Charles Rochet & StÈphane Villeneuve, 2010. "Large Risks, Limited Liability, and Dynamic Moral Hazard," Econometrica, Econometric Society, vol. 78(1), pages 73-118, 01.
- Ing-Haw Cheng & Harrison Hong & Jose A. Scheinkman, 2010.
"Yesterday's Heroes: Compensation and Creative Risk-Taking,"
NBER Working Papers
16176, National Bureau of Economic Research, Inc.
- Ing-Haw Cheng & Harrison Hong & Jose Scheinkman, 2010. "Yesterday's Heroes: Compensation and Creative Risk-Taking," NBER Chapters, in: Market Institutions and Financial Market Risk National Bureau of Economic Research, Inc.
- Völz, Manja & Wedow, Michael, 2009. "Does banks size distort market prices? Evidence for too-big-to-fail in the CDS market," Discussion Paper Series 2: Banking and Financial Studies 2009,06, Deutsche Bundesbank, Research Centre.
- John, Kose & Mehran, Hamid & Qian, Yiming, 2010. "Outside monitoring and CEO compensation in the banking industry," Journal of Corporate Finance, Elsevier, vol. 16(4), pages 383-399, September.
- repec:bla:restud:v:74:y:2007:i:2:p:345-390 is not listed on IDEAS
- Bruno Biais & Thomas Mariotti & Guillaume Plantin & Jean-Charles Rochet, 2007.
"Dynamic Security Design: Convergence to Continuous Time and Asset Pricing Implications,"
Review of Economic Studies,
Oxford University Press, vol. 74(2), pages 345-390.
- Biais, Bruno & Mariotti, Thomas & Plantin, Guillaume & Rochet, Jean-Charles, 2004. "Dynamic Security Design: Convergence to Continuous Time and Asset Pricing Implications," IDEI Working Papers 312, Institut d'Économie Industrielle (IDEI), Toulouse, revised Sep 2006.
When requesting a correction, please mention this item's handle: RePEc:bge:wpaper:649. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bruno Guallar)
If references are entirely missing, you can add them using this form.