➬ Systemic Risk and Optimal Regulatory Architecture Read ➵ Author Juan Solé – Thomashillier.co.uk
- 26 pages
- Systemic Risk and Optimal Regulatory Architecture
- Juan Solé
- 01 October 2019 Juan Solé
Until The Recent Financial Crisis, The Safety And Soundness Of Financial Institutions Was Assessed From The Perspective Of The Individual Institution The Financial Crisis Highlighted The Need To Take Systemic Externalities Seriously When Rethinking Prudential Oversight And The Regulatory Architecture Current Financial Reform Legislation Worldwide Reflects This Intent However, These Reforms Have Overlooked The Need To Also Consider Regulatory Agencies Forbearance And Information Sharing Incentives In A Political Economy Model That Explicitly Accounts For Systemic Connectedness, And Regulators Incentives, We Show That Under An Expanded Mandate To Explicitly Oversee Systemic Risk, Regulators Would Be Forbearing Towards Systemically Important Institutions We Also Show That When Some Regulators Have Access To Information Regarding An Institutions Degree Of Systemic Importance, These Regulators May Have Little Incentive To Gather And Share It With Other Regulators These Findings Suggest That And We Show Conditions Under Which A Unified Regulatory Arrangement Can Reduce The Degree Of Systemic Risk Vis Vis A Multiple Regulatory Arrangement.