The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions
IMF Working Papers, March 14, 2014
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- The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions
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Bibliographic details
- Authors: Stijn Claessens, Laura E. Kodres
- Published: March 14, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781484335970.001
Authors and Publication
- By Stijn Claessens, Laura E. Kodres
- March 14, 2014
- IMF Working Papers, Working Paper No. 2014/046
- Pages: 39
- Volume: 2014
- Issue: 046
- DOI: https://doi.org/10.5089/9781484335970.001
- Stock No: WPIEA2014046
- ISBN: 9781484335970
- ISSN: 1018-5941
- Citation preview (Chicago): Stijn Claessens, and Laura E. Kodres "The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions", IMF Working Papers 2014, 046 (2014), accessed 9/18/2026, https://doi.org/10.5089/9781484335970.001
Core thesis and analytical framework
- Identifies current challenges for creating stable, yet efficient financial systems using lessons from recent and past crises.
- Reforms need to start from three tenets:
- adopting a system-wide perspective explicitly aimed at addressing market failures;
- understanding and incorporating into regulations agents’ incentives so as to align them better with societies’ goals;
- acknowledging that risks of crises will always remain, in part due to (unknown) unknowns – be they tipping points, fault lines, or spillovers.
- Corresponding to these three tenets, specific areas for further reforms are identified.
Key findings
- Market failures require a system-wide regulatory perspective rather than narrow, institution-by-institution fixes.
- Regulatory design must incorporate agents’ incentives to better align private behavior with social objectives.
- Risks of crises will persist because of (unknown) unknowns, including tipping points, fault lines, and spillovers.
- Overly fine-tuned regulations can be counterproductive; in many cases a “do not harm” approach is preferable.
- Crisis management should be integrated into financial system design rather than left to improvisation after a crisis emerges.
Policy recommendations and guidance
- Start reforms from the three tenets listed under the analytical framework.
- Target specific areas for further reforms that correspond to the three tenets (system-wide perspective, incentive alignment, and recognition of lingering crisis risks).
- Resist fine-tuning regulations; favor a “do not harm” approach where appropriate.
- Make crisis management an integral part of system design, ensuring preparedness for residual risks and unknown contingencies.
Subjects and keywords (as provided)
- Subject: Financial crises, Financial regulation and supervision, Financial sector policy and analysis, Financial services, Liquidity requirements, Shadow banking, Systemic risk, Tax incentives
- Keywords: bank, capital, counterparty risk, Financial crises, financial system stress tests, Global, intra-day counterparty risk, Liquidity requirements, macroprudential policies, market, market discipline, market infrastructure, market intelligence, market participant, market signal, moribund securitization market, OTC derivatives market, party repo market, regulation, risk, securitization market, Shadow banking, Systemic risk, systemic risks, WP
Source: The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions, Stijn Claessens and Laura E. Kodres (IMF Working Paper No. 2014/046, March 14, 2014).