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The Pending Challenges in Global Financial Regulation Reform

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  • Javier Suarez

    (Centre for Monetary and Financial Studies (CEMFI), Madrid and at the Centre for Economic Policy Research (CEPR) UK. e-mail: suarez@cemfi.es)

Abstract

The financial crisis which began in the summer of 2007 has its roots in the under-estimation of systemic risk, in turn due to the absence of a macroprudential approach to the design of financial regulation and macroeconomic policies, as well as the excessively optimistic judgment of the originate-to-distribute model of banking. The ongoing process of reform of the global financial system aims to correct these mistakes. After a brief overview of the challenges ahead, this paper focuses on issues regarding the regulatory treatment of liquidity risk, looking at them through the eyes of the liquidity insurance arrangement proposed in Perotti and Suarez (2009).

Suggested Citation

  • Javier Suarez, 2010. "The Pending Challenges in Global Financial Regulation Reform," Margin: The Journal of Applied Economic Research, National Council of Applied Economic Research, vol. 4(2), pages 241-253, May.
    • Handle: RePEc:sae:mareco:v:4:y:2010:i:2:p:241-253
    DOI: 10.1177/097380101000400206
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    References listed on IDEAS

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    1. Douglas W. Diamond & Philip H. Dybvig, 2000. "Bank runs, deposit insurance, and liquidity," Quarterly Review, Federal Reserve Bank of Minneapolis, vol. 24(Win), pages 14-23.
    2. Douglas W. Diamond & Raghuram G. Rajan, 2001. "Liquidity Risk, Liquidity Creation, and Financial Fragility: A Theory of Banking," Journal of Political Economy, University of Chicago Press, vol. 109(2), pages 287-327, April.
    3. Viral V. Acharya & Lasse Pedersen & Thomas Philippon & Matthew Richardson, 2009. "Regulating Systemic Risk," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 18(2), pages 174-175, May.
    4. Milne,Alistair, 2009. "The Fall of the House of Credit," Cambridge Books, Cambridge University Press, number 9780521762144, January.
    5. Ricardo J. Caballero & Pablo Kurlat, 2009. "The surprising origin and nature of financial crises: a macroeconomic policy proposal," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 19-68.
    6. Calomiris, Charles W & Kahn, Charles M, 1991. "The Role of Demandable Debt in Structuring Optimal Banking Arrangements," American Economic Review, American Economic Association, vol. 81(3), pages 497-513, June.
    7. Anil K. Kashyap & Raghuram G. Rajan & Jeremy C. Stein, 2008. "Rethinking capital regulation," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 431-471.
    8. Gersbach, Hans, 2009. "Private Insurance Against Systemic Crises?," CEPR Discussion Papers 7342, C.E.P.R. Discussion Papers.
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    Citations

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    Cited by:

    1. Avadanei, Anamaria, 2010. "Noi provocări pentru stabilitatea financiară în contextul crizei internaționale [New Challenges for Financial Stability in the context of the International Crisis]," MPRA Paper 28555, University Library of Munich, Germany.

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    More about this item

    Keywords

    Financial Crisis; Liquidity Risk; Systemic Risk; Financial Regulation; Liquidity Insurance; JEL Classification: E60; JEL Classification: G28;
    All these keywords.

    JEL classification:

    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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