IDEAS home Printed from https://ideas.repec.org/p/bis/biswps/792.html
   My bibliography  Save this paper

Is the financial system sufficiently resilient: a research programme and policy agenda

Author

Listed:
  • Paul Tucker

Abstract

The paper discusses why the financial system is not as resilient as policymakers currently claim - despite extensive regulatory reforms from a very weak starting point.The paper discusses different policy strategies for making some of the debt of some banks "information-insensitive", so that they it would be treated as safe in all but the most stressed circumstances. For the current prudential strategy, which is centred on minimum equity requirements, the paper argues that central banks and other agencies should start publishing annual staff reports on where regulatory and supervisory policy has been surreptitiously tightened or loosened.The paper aims to spark and contribute to the debate on the second phase of stability reforms that will be needed. It sets out an alternative policy strategy based on 100% liquidity cover for the short-term debt of banks (and shadow banks), and for the creditor hierarchy of operating banks and holding companies. In this proposal, the haircut policy of central banks would become the key instrument in determining bank equity requirements and the terms on which they could borrow in secured money markets. As such, this strategy would operationalise the theoretical and empirical work of Bengt Holmström and Gary Gorton.

Suggested Citation

  • Paul Tucker, 2019. "Is the financial system sufficiently resilient: a research programme and policy agenda," BIS Working Papers 792, Bank for International Settlements.
  • Handle: RePEc:bis:biswps:792
    as

    Download full text from publisher

    File URL: https://www.bis.org/publ/work792.pdf
    File Function: Full PDF document
    Download Restriction: no

    File URL: https://www.bis.org/publ/work792.htm
    Download Restriction: no

    References listed on IDEAS

    as
    1. Lucas, Robert E, Jr, 1980. "Methods and Problems in Business Cycle Theory," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 12(4), pages 696-715, November.
    2. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Win, pages 14-23.
    3. Gorton, Gary, 1988. "Banking Panics and Business Cycles," Oxford Economic Papers, Oxford University Press, vol. 40(4), pages 751-781, December.
    4. Gorton, Gary & Metrick, Andrew, 2012. "Securitized banking and the run on repo," Journal of Financial Economics, Elsevier, vol. 104(3), pages 425-451.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    regulatory reforms; Basel III; great financial crisis;

    JEL classification:

    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • 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

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bis:biswps:792. 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: (Christian Beslmeisl). General contact details of provider: http://edirc.repec.org/data/bisssch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.