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Some Lessons for Bank Regulation from Recent Crises

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  • D.T. Llewellyn

Abstract

The causes of systemic bank distress are complex and multi-dimensional involving economic, financial, regulatory and structural weaknesses. This also means that regulatory approaches also need to be multi-dimensional. The paper suggests that an optimum "regulatory regime" needs to incorporate seven key components: regulation (the rules imposed by official agencies), official supervision, incentive structures within banks, market discipline, intervention arrangements in the event of distress, corporate governance arrangements with banks, and the accountability of regulatory agencies. All are necessary but none alone are sufficient for systemic stability. As there are trade-offs between the components, regulatory strategy needs to focus on the overall impact of the regime rather than only the regulation component.

Suggested Citation

  • D.T. Llewellyn, 2000. "Some Lessons for Bank Regulation from Recent Crises," DNB Staff Reports (discontinued) 51, Netherlands Central Bank.
  • Handle: RePEc:dnb:staffs:51
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    File URL: https://www.dnb.nl/binaries/sr051_tcm46-146829.pdf
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    References listed on IDEAS

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    Cited by:

    1. Victoria Miller & Luc Vallée, 2016. "Unconventional Bank Bailouts in Fixed Exchange Rate Regimes," Open Economies Review, Springer, vol. 27(1), pages 39-49, February.
    2. Abdel-Baki Monal A., 2012. "Coalitions within the Egyptian Banking Sector: Catalysts of the Popular Revolution," Business and Politics, De Gruyter, vol. 14(1), pages 1-26, April.
    3. Petr Pavlík, 2016. "Theoretical backgrounds of modern bank regulation," Český finanční a účetní časopis, University of Economics, Prague, vol. 2016(2), pages 5-33.

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