Achieving Financial Stability: Challenges To Prudential Regulation

The Great Financial Crisis of 2007–2010 exposed the existence of significant imperfections in the financial regulatory framework that encouraged excessive risk-taking and increased system vulnerabilities. The resulting high cost of the crisis in terms of lost aggregate income and wealth, and increased unemployment has reinforced the need to improve financial stability within and across countries via changes in traditional microprudential regulation, as well as the introduction of new macroprudential regulations. Amongst the questions raised are: What are the challenges to prudential regulation? How has the regulatory environment changed in recent years? How do the reforms interplay with market discipline, risk-taking incentives and risk management arrangements? Does the new regulatory framework allow for the introduction of financial innovation, and the associated benefits, without increasing disruptive financial risk?Contents: Preface Acknowledgments About the Editors About the Contributors Special Addresses: Challenges for Future Monetary Policy Frameworks: A European Perspective (Vítor Constâncio) Income Inequality: The Battlefield Casualty of Post-Crisis Financial Policy (Karen Shaw Petrou) A Practical Case for Rules-Based Macroprudential Policy (Adam S Posen) Financial Regulation: The Evolving Macro- and Microprudential Landscape: Evolving Micro- and Macroprudential Regulations in the United States: A Primer (Diana Hancock) The Regulatory Response to the Sovereign-Bank Nexus (Luc Laeven) Japan's Regulatory Responses to Banking Crisis (Masami Imai) The Costs and Benefits of Bank Capital Requirements (Gianni De Nicolò) Capital Regulation: Capital Regulation: How Much Capital is Needed? (Mark Carey) CoCos: A Promising Idea Poorly Executed (Richard J Herring) Capital Regulation: Lessons from a Macroeconomic Model (Caterina Mendicino, Kalin Nikolov and Dominik Supera) Liquidity Regulation: How Should Bank Liquidity be Regulated? (Franklin Allen and Douglas Gale) How Do We Figure Out Optimal Liquidity Regulation? (Douglas W Diamond and Anil K Kashyap) The Interplay Between Liquidity Regulation, Monetary Policy Implementation and Financial Stability(Todd Keister) Liquidity and Capital: Substitutes or Complements? (Marie Hoerova) Market Infrastructures, Central Clearing and Collateral Management: An Incentive Theory of Counterparty Risk, Margins, and CCP Design (Florian Heider) Monitoring CCP Exposure, In Real Time If Needed (Albert J Menkveld) Regulation and Financial Innovation: Innovation & Regulation: Some Preliminary Observations (Michael S Barr) Financial Innovation and Regulation (Thorsten Beck) Thoughts About Financial Innovation (Josh Lerner and Peter Tufano) How Technological Innovation Will Reshape Financial Regulation (Carmelo Salleo) Bail-in Versus Bail-Outs: Incentives and Financial Stability: Bail-in-Able Debt and Fragility (Russell Cooper) Government Guarantees to Financial Institutions: Banks' Incentives and Fiscal Sustainability (Agnese Leonello) The Unconvertible CoCo Bonds (Paul Glasserman and Enrico Perotti) Where to From Here?: The Macroprudential Toolkit (Richard Berner) The Great Financial Crisis and Its Aftermath: A Perspective from Asia (Hans Genberg) Regulatory Reform: Where to from Here? (Xavier Vives) Readership: Advanced economics, finance and policy undergraduates and postgraduates; finance professionals; policy makers and researchers who are interested in money and banking, international banks and financial institutions, and financial policy reforms. Keywords:Money and Banking;International Banking;Financial Instititions;Banks;Regulations;Compliance;Financial Crisis;Great Financial Crisis 2008;Microprudential;Macroprudential;Financial StabilityReview:0