Systemic risk and macroprudential regulation

2015 ◽  
pp. 197-219 ◽  
Author(s):  
Franklin Allen ◽  
Elena Carletti
Keyword(s):  
Systemic Risk ◽  
Macroprudential Regulation

scholarly journals GROWTH AND WELFARE EFFECTS OF MACROPRUDENTIAL REGULATION

2018 ◽  
Vol 23 (8) ◽  
pp. 3140-3162 ◽  
Author(s):  
Pierre-Richard Agénor
Keyword(s):  
Systemic Risk ◽  
Overlapping Generations ◽  
Welfare Effects ◽  
Financial Supervision ◽  
Overlapping Generations Model ◽  
Macroprudential Regulation ◽  
Bank Monitoring ◽  
Investment Projects ◽  
Optimal Monitoring ◽  
Reserve Ratio

This paper studies the growth and welfare effects of macroprudential regulation in an overlapping generations model of endogenous growth with banking and agency costs. Indivisible investment projects combine with informational imperfections to create a double moral hazard problem à la Holmström–Tirole and a role for bank monitoring. When the optimal monitoring intensity is endogenously determined, an increase in the required reserve ratio (motivated by systemic risk considerations) has conflicting effects on investment and growth. On one hand, requiring banks to put away a fraction of the deposits that they receive reduces the supply of loanable funds. On the other, a higher required ratio raises incentives to save and mitigates banks' incentives to monitor, thereby lowering monitoring costs and freeing up resources to increase lending. In addition, it may mitigate the systemic risk externality associated with excessive leverage. This trade-off can be internalized by choosing the required reserve ratio that maximizes growth and welfare. However, the risk of disintermediation means that in practice financial supervision may also need to be strengthened, and the perimeter of regulation broadened, if the optimal ratio is relatively high.

scholarly journals Macroprudential Regulation in Ensuring of the Development of Financial Markets

2020 ◽  
Vol 22 (1) ◽  
pp. 24-30
Author(s):  
Victoria Kovalenko ◽  
◽  
Sergii Sheludko ◽  
Keyword(s):  
Financial Markets ◽  
Systemic Risk ◽  
Financial Stability ◽  
Banking Sector ◽  
Asset Markets ◽  
Price Stability ◽  
Shadow Banking ◽  
Credit System ◽  
Macroprudential Regulation ◽  
Goods And Services

Introduction. The study has confirmed that ensuring of financial markets’ development stability is connected with the development of an effective system for macroprudential regulation. The financial crisis has shown that price stability is not enough to ensure financial stability. The financial and business cycles are not synchronized – therefore risks can arise, especially during periods of “disconnection” between two cycles. Purpose. The aim of the paper is to systematize basic concepts of macroprudential regulation in financial markets, considering international practice of its instruments selection and usage. Results. It is clarified the approaches to a set of macroprudential instruments formation which depends on the country’s economic development and the vulnerability of a financial sector to internal and external shocks. It has been substantiated that monetary regulation is aimed at ensuring price stability in the market for goods and services. It has been proven that it should not be used to address hotbeds of volatility in asset markets. This is a subject for macroprudential regulation, aimed to ensuring the stability of financial markets and containing systemic risk. It has been identified the factors causing the need to implement the strategy of macroprudential regulation in financial markets to ensure their stable development. They include: systemic risk and financial cycles; considering the importance of a growing market’s credit system and measures to address its risks; the need to increase the transparency of the shadow banking sector; problems in regulating the FinTech branch; international financial standards; the growing role of the central periphery in international finance. Conclusions. It has been concluded that a powerful macroprudential political mandate and an adequate set of instruments should be given for central banks to solve the problem of increasing financial risks, especially in situations where monetary regulation is adaptive. It has been substantiated the conclusion about the need to develop supervisory and coordination mechanisms in the financial market and the introduction of end-to-end monitoring of systemic risks as a prerequisite for restoring financial stability.

scholarly journals Explaining the Stunted Rise of Macroprudential Regulatory Philosophies

Politik ◽  
2013 ◽  
Vol 16 (4) ◽  
Author(s):  
Andrew Baker
Keyword(s):  
Systemic Risk ◽  
Policy Makers ◽  
Macroprudential Regulation ◽  
Regulatory Practice

In the aftermath of the nancial crash of 2008, policy makers operating in international nancial regula- tory networks discovered macroprudential regulation (MPR) and ‘systemic risk’. Macroprudential ideas rose to prominence quite rapidly in the aftermath of the nancial crash of 2008, but the process of translating these ideas into concrete regulatory practice has proceeded slowly and incrementally. e article sets out to explain why this has been the case citing ve factors that have been responsible for stunting the development of macroprudential regulation. 

The “New” Neoclassical International Political Economy of Macroprudential Regulation and Capital Controls: “Style” over “Substance”

2020 ◽  
Vol 52 (4) ◽  
pp. 662-672
Author(s):  
Devin T. Rafferty
Keyword(s):  
Political Economy ◽  
Systemic Risk ◽  
International Political Economy ◽  
Capital Controls ◽  
2008 Financial Crisis ◽  
Macroprudential Regulation ◽  
Ideational Change ◽  
The 2008 Financial Crisis ◽  
Financial Cycles ◽  
The International Monetary Fund

A “new” neoclassical international political economy (NNIPE) emerged from the 2008 financial crisis showing how macroprudential regulation and capital controls (MPR-CC) can eliminate the systemic risk behind endogenous financial cycles. An implication of this is that decentralized capitalism is inherently financially unstable, which appears to make inroads with heterodox traditions. However, this paper demonstrates that NNIPE represents a superficial, rhetorical appearance of theoretical improvement, as represented in its “style,” while the “substance” of its underlying assumptions and mechanisms remain mired in neoclassicism. Moreover, it grew out of ideologically-motivated ideational change at the International Monetary Fund.

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