IDEAS home Printed from https://ideas.repec.org/p/eab/financ/23014.html
   My bibliography  Save this paper

Regulating Systemic Risk

Author

Listed:
  • Masahiro Kawai

    (Asian Development Bank Institute)

  • Michael Pomerleano

Abstract

The failure to spot emerging systemic risk and prevent the current global financial crisis warrants a reexamination of the approach taken so far to crisis prevention. The paper argues that financial crises can be prevented, as they build up over time due to policy mistakes and eventually erupt in slow motion. While one cannot predict the precise timing of crises, one can avert them by identifying and dealing with sources of instability. For this purpose, policymakers need to strengthen top-down macroprudential supervision, complemented by bottom-up microprudential supervision. The paper explores such a strategy and the institutional setting required to implement it at the national level. Given that the recent regulatory reforms that have been undertaken to address systemic risks are inadequate to prevent and combat future crises, the paper argues that national measures to promote financial stability are crucial and that the Westphalian principles governing international financial oversight should be rejected. The paper proposes that while an effective national systemic regulator should be established, strong international cooperation is indispensable for financial stability.

Suggested Citation

  • Masahiro Kawai & Michael Pomerleano, 2010. "Regulating Systemic Risk," Finance Working Papers 23014, East Asian Bureau of Economic Research.
  • Handle: RePEc:eab:financ:23014
    as

    Download full text from publisher

    File URL: http://www.eaber.org/node/23014
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeffrey Carmichael & Michael Pomerleano, 2002. "The Development and Regulation of Non-Bank Financial Institutions," World Bank Publications, The World Bank, number 15236.
    2. Masahiro Kawai, 2005. "Reform of the Japanese banking system," International Economics and Economic Policy, Springer, vol. 2(4), pages 307-335, December.
    3. Kawai, Masahiro, 2000. "The resolution of the East Asian crisis: financial and corporate sector restructuring," Journal of Asian Economics, Elsevier, vol. 11(2), pages 133-168.
    4. Jerry H Tempelman, 2009. "Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis," Business Economics, Palgrave Macmillan;National Association for Business Economics, vol. 44(3), pages 182-183, July.
    5. Claudio Borio & Ilhyock Shim, 2007. "What can (macro-)prudential policy do to support monetary policy?," BIS Working Papers 242, Bank for International Settlements.
    6. Martin Èihák & Richard Podpiera, 2006. "Is One Watchdog Better than Three? International Experience with Integrated Financial-Sector Supervision (in English)," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 56(3-4), pages 102-126, March.
    7. Martin Cihak & Richard Podpiera, 2006. "Is One Watchdog Better Than Three? International Experience with Integrated Financial Sector Supervision," IMF Working Papers 06/57, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dragan Miodrag Momirovic, 2012. "New Architecture Of Global Financial Supervision-Macroprudential Oversight," EuroEconomica, Danubius University of Galati, issue 2(31), pages 88-107, May.

    More about this item

    Keywords

    systemic risk; global financial crisis; macroprudential supervision; microprudential supervision; regulatory reform;

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    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:eab:financ:23014. 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: (Shiro Armstrong). General contact details of provider: http://edirc.repec.org/data/eaberau.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.