Regulating Systemic Risk: Towards an Analytical Framework

64 Pages Posted: 6 Jan 2011 Last revised: 28 Dec 2014

See all articles by Iman Anabtawi

Iman Anabtawi

University of California, Los Angeles (UCLA) - School of Law

Steven L. Schwarcz

Duke University School of Law

Date Written: October 21, 2011


The global financial crisis demonstrated the inability and unwillingness of financial market participants to safeguard the stability of the financial system. It also highlighted the enormous direct and indirect costs of addressing systemic crises after they have occurred, as opposed to attempting to prevent them from arising. Governments and international organizations are responding with measures intended to make the financial system more resilient to economic shocks, many of which will be implemented by regulatory bodies over time. These measures suffer, however, from the lack of a theoretical account of how systemic risk propagates within the financial system and why regulatory intervention is needed to disrupt it. In this Article, we address this deficiency by examining how systemic risk is transmitted. We then proceed to explain why, in the absence of regulation, market participants cannot be relied upon to disrupt or otherwise limit the transmission of systemic risk. Finally, we advance an analytical framework to inform systemic risk regulation.

Keywords: financial markets, systemic risk, financial crisis

Suggested Citation

Anabtawi, Iman and Schwarcz, Steven L., Regulating Systemic Risk: Towards an Analytical Framework (October 21, 2011). Notre Dame Law Review, Vol. 86, No. 4, p. 1349, 2011, UCLA School of Law, Law-Econ Research Paper No. 11-01, Available at SSRN:

Iman Anabtawi

University of California, Los Angeles (UCLA) - School of Law ( email )

385 Charles E. Young Dr. East
Room 1242
Los Angeles, CA 90095-1476
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Steven L. Schwarcz (Contact Author)

Duke University School of Law ( email )

210 Science Drive
Box 90362
Durham, NC 27708
United States
919-613-7060 (Phone)
919-613-7231 (Fax)

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