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Containing systemic risk : Paradigm-based perspectives on regulatory reform / Augusto de la Torre
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- De la Torre, Augusto
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Banks & Banking Reform.
- Debt Markets.
- Emerging Markets.
- Finance and Financial Sector Development.
- Financial crises.
- Financial development.
- Financial Intermediation.
- Financial policy.
- Financial regulation.
- Labor Policies.
- Regulatory architecture.
- Local Subjects:
- Banks & Banking Reform.
- Debt Markets.
- Emerging Markets.
- Finance and Financial Sector Development.
- Financial crises.
- Financial development.
- Financial Intermediation.
- Financial policy.
- Financial regulation.
- Labor Policies.
- Regulatory architecture.
- Physical Description:
- 1 online resource (28 pages)
- Other Title:
- Containing systemic risk
- Place of Publication:
- Washington, D.C., The World Bank, 2011
- System Details:
- data file
- Summary:
- Financial crises can happen for a variety of reasons: (a) nobody really understands what is going on (the collective cognition paradigm); (b) some understand better than others and take advantage of their knowledge (the asymmetric information paradigm); (c) everybody understands, but crises are a natural part of the financial landscape (the costly enforcement paradigm); or (d) everybody understands, yet no one acts because private and social interests do not coincide (the collective action paradigm). The four paradigms have different and often conflicting prudential policy implications. This paper proposes and discusses three sets of reforms that would give due weight to the insights from the collective action and collective cognition paradigms by redrawing the regulatory perimeter to internalize systemic risk without promoting dynamic regulatory arbitrage; introducing a truly systemic liquidity regulation that moves away from a purely idiosyncratic focus on maturity mismatches; and building up the supervisory function while avoiding the pitfalls of expanded official oversight.
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