Financial Crisis Containment and its Implications for Institutional and Legal Reform

Abstract

The article addresses financial crisis containment from a governance perspective. It depicts containment decision making by governments as a complex technical process of different stages. Deviating from the existing well-worn paradigms, the article argues that efficient crisis containment requires a clear allocation of responsibilities with explicit objectives and powers, proper channels of accountability and more transparency. It models a governance framework the core of which builds a crisis containment council. Shared responsibility and accountability of the council members for crisis containment would incentivize them to collaboratively decide on containment policies which best possible correspond with the interest of social welfare.

Keywords: Financial crisis, crisis containment, crisis management, systemic risk, governance

JEL Classification: G01, G18, G28, K23, K40