The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions

March 14, 2014

Preview Citation

Format: Chicago

Stijn Claessens, and Laura E. Kodres The Regulatory Responses to the Global Financial Crisis: Some Uncomfortable Questions, (USA: International Monetary Fund, 2014) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

We identify 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; and 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. Policy makers need to resist, however, fine-tuning regulations: a “do not harm” approach is often preferable. And as risks will remain, crisis management needs to be made an integral part of system design, not relegated to improvisation after the fact.

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

Publication Details

Pages:

39
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/046
Stock No:

WPIEA2014046
ISBN:

9781484335970
ISSN:

1018-5941

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