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Reducing Systemic Risk Through the Reform of Capital Regulation

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  • Hal S. Scott

Abstract

Capital requirements are a key element in containing systemic risk. This article argues that the market needs to play a more significant role in determining these requirements. The Basel process has a bad track record and there are inherent methodological and political difficulties in a group of regulators, particularly an international one, determining the appropriate amount of capital for a given risk. An added role for the market depends, however, on fuller disclosure by banks of their risks and minimization of the moral hazard created by bailouts, so creditors and counterparties bear a fuller measure of the risk. Oxford University Press 2010, all rights reserved, Oxford University Press.

Suggested Citation

  • Hal S. Scott, 2010. "Reducing Systemic Risk Through the Reform of Capital Regulation," Journal of International Economic Law, Oxford University Press, vol. 13(3), pages 763-778, September.
    • Handle: RePEc:oup:jieclw:v:13:y:2010:i:3:p:763-778
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    File URL: http://hdl.handle.net/10.1093/jiel/jgq027
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    Cited by:

    1. Staszkiewicz, Piotr W., 2010. "Ryzyko struktury: Rys koncepcyjny [The Risk of the Structure: Initial proposal]," MPRA Paper 34257, University Library of Munich, Germany, revised 01 May 2011.
    2. János Kálmán, 2016. "Bank resolution as a new MNB function – resolution of MKB BankAdministrative law aspects of the macroprudential regulation and supervision of the financial intermediary system – normativity, organisat," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 15(3), pages 27-50.
    3. Ellis, Scott & Sharma, Satish & Brzeszczyński, Janusz, 2022. "Systemic risk measures and regulatory challenges," Journal of Financial Stability, Elsevier, vol. 61(C).
    4. Cabral, Ricardo, 2013. "A perspective on the symptoms and causes of the financial crisis," Journal of Banking & Finance, Elsevier, vol. 37(1), pages 103-117.

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