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Post crisis challenges to bank regulation

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Abstract

The current crisis has swept aside not only the whole of the US investment banking industry but also the consensual perception of banking risks, contagion and their implication for banking regulation. As everyone agrees now, risks where mispriced, they accumulated in neuralgic points of the financial system, and where amplified by procyclical regulation as well as by the instability and fragility of financial institutions. The use of ratings as carved in stone and lack of adequate procedure to swiftly deal with systemic institutions bankruptcy (whether too-big-to-fail, too complex to fail or too-many to fail). The current paper will not deal with the description and analysis of the crisis, already covered in other contributions to this issue will address the critical choice regulatory authorities will face. In the future regulation has to change, but it is not clear that it will change in the right direction. This may occur if regulatory authorities, possibly influenced by public opinion and political pressure, adopt an incorrect view of financial crisis prevention and management. Indeed, there are two approaches to post-crisis regulation. One is the rare event approach, whereby financial crises will occur infrequently, but are inescapable.

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  • Xavier Freixas, 2009. "Post crisis challenges to bank regulation," Economics Working Papers 1201, Department of Economics and Business, Universitat Pompeu Fabra.
  • Handle: RePEc:upf:upfgen:1201
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    Cited by:

    1. Tamgac, Unay, 2011. "Crisis and self-fulfilling expectations: The Turkish experience in 1994 and 2000-2001," International Review of Economics & Finance, Elsevier, vol. 20(1), pages 44-58, January.
    2. repec:eee:spacre:v:17:y:2014:i:1:p:58-70 is not listed on IDEAS
    3. Nicholas Crafts & Peter Fearon, 2010. "Lessons from the 1930s Great Depression," Oxford Review of Economic Policy, Oxford University Press, vol. 26(3), pages 285-317, Autumn.
    4. Uribe Gil, Jorge Mario & Ulloa Villegas, Inés Maria, 2012. "La medición del riesgo en eventos extremos. Una revisión metodológica en contexto," REVISTA LECTURAS DE ECONOMÍA, UNIVERSIDAD DE ANTIOQUIA - CIE, June.
    5. Ulrich Suntum & Cordelius Ilgmann, 2013. "Bad banks: a proposal based on German financial history," European Journal of Law and Economics, Springer, vol. 35(3), pages 367-384, June.
    6. repec:eee:finsta:v:30:y:2017:i:c:p:229-239 is not listed on IDEAS
    7. Haucap, Justus & Heimeshoff, Ulrich & Uhde, André, 2010. "Zur Neuregulierung des Bankensektors nach der Finanzkrise: Bewertung der Reformvorhaben der EU aus ordnungspolitischer Sicht," DICE Ordnungspolitische Perspektiven 02, University of Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    8. Michael Diemer & Uwe Vollmer, 2015. "What makes banking crisis resolution difficult? Lessons from Japan and the Nordic Countries," Eurasian Economic Review, Springer;Eurasia Business and Economics Society, vol. 5(2), pages 251-277, December.

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