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Containing Systemic Risk

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  • Karl Whelan

    (University College Dublin)

Abstract

Systemic risk refers to the risk of financial system breakdown due to linkages between institutions. This risk cannot be assessed by looking at how individual institutions manage risks but instead requires a full understanding of how the system as a whole operates. At present, the data available to central banks and financial regulators are not at all adequate for the task of assessing systemic risk and the new European Systemic Risk Board needs to address this issue. There is a lot of exciting ongoing research devoted to measuring systemic risk and providing signals to regulators as to when and where they should intervene. However, the tools being developed are still limited in their usefulness. More pressing than the development of these tools is the development and implementation of policy measures to make the financial system more robust. These measures should include higher capital ratios, limits on non-core funding and redesigning financial systems to be less complex.

Suggested Citation

  • Karl Whelan, 2009. "Containing Systemic Risk," Working Papers 200927, School of Economics, University College Dublin.
    • Handle: RePEc:ucn:wpaper:200927
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    File URL: http://www.ucd.ie/t4cms/wp09.27.pdf
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    References listed on IDEAS

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    1. Carmen M. Reinhart & Kenneth S. Rogoff, 2014. "This Time is Different: A Panoramic View of Eight Centuries of Financial Crises," Annals of Economics and Finance, Society for AEF, vol. 15(2), pages 215-268, November.
    2. Carmen M. Reinhart & Kenneth S. Rogoff, 2009. "Varieties of Crises and Their Dates," Introductory Chapters, in: This Time Is Different: Eight Centuries of Financial Folly, Princeton University Press.
    3. Stephen Morris & Hyun Song Shin, 2008. "Financial Regulation in a System Context," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 229-274.
    4. Helmut Elsinger & Alfred Lehar & Martin Summer, 2006. "Using Market Information for Banking System Risk Assessment," International Journal of Central Banking, International Journal of Central Banking, vol. 2(1), March.
    5. Lucia Alessi & Carsten Detken, 2009. "Global liquidity as an early warning indicator for asset price boom/bust cycles," Research Bulletin, European Central Bank, vol. 8, pages 7-9.
    6. Detken, Carsten & Alessi, Lucia, 2009. "'Real time'early warning indicators for costly asset price boom/bust cycles: a role for global liquidity," Working Paper Series 1039, European Central Bank.
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    Cited by:

    1. Azizi , Ahmad, 2012. "Financial Regulation in the United Kingdom: Historical Foundations and Current Practices," Journal of Money and Economy, Monetary and Banking Research Institute, Central Bank of the Islamic Republic of Iran, vol. 6(2), pages 123-169, December.
    2. Vinko Zlatić & Giampaolo Gabbi & Hrvoje Abraham, 2015. "Reduction of Systemic Risk by Means of Pigouvian Taxation," PLOS ONE, Public Library of Science, vol. 10(7), pages 1-18, July.
    3. D. M. Nachane, 2016. "Global Crisis, Regulatory Reform and International Policy Coordination," South Asian Journal of Macroeconomics and Public Finance, , vol. 5(1), pages 63-95, June.
    4. Co-Pierre Georg & Jenny Poschmann, 2010. "Systemic risk in a network model of interbank markets with central bank activity," Jena Economics Research Papers 2010-033, Friedrich-Schiller-University Jena.

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    Keywords

    Financial Risk; Systemic Risk; Banking;
    All these keywords.

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