Past and Future Regulation to Prevent a Systemic Financial Crisis

PSL Quarterly Review, Vol. 63, No. 253, pp. 101-127, 2010

27 Pages Posted: 22 Apr 2011

See all articles by Mario Sarcinelli

Mario Sarcinelli

University of Rome I - Department of Public Economics

Date Written: April 15, 2011

Abstract

The article is a revised and updated version of that published on the March 2010 issues of Moneta e Credito. It was there claimed that, up to now, the G20 has supervised the process to revitalize the real economy affected by the Great Recession through fiscal stimuli and a very easy monetary policy, and to rescue the battered financial system by injecting capital into giant banks and firms. The G20 is now turning its attention to financial regulation, with the FSB as its main operational arm. The ideas that are being proposed stress the need for disincentives toward too much risk taking (more capital, higher liquidity, limits to remunerations and bonuses, etc.), particularly by big and complex financial institutions that are likely to entail systemic risks. The paper maintains that, as the disincentive approach is insufficient to deter financial managers looking for power, some kind of segmentation needs to be introduced, as suggested by Paul Volcker.

Keywords: Introduction, Financial Crisis, Rules

JEL Classification: E44, G1, G18, G28

Suggested Citation

Sarcinelli, Mario, Past and Future Regulation to Prevent a Systemic Financial Crisis (April 15, 2011). PSL Quarterly Review, Vol. 63, No. 253, pp. 101-127, 2010. Available at SSRN: https://ssrn.com/abstract=1810811

Mario Sarcinelli (Contact Author)

University of Rome I - Department of Public Economics ( email )

via del Castro Laurenziano, 9
Rome, RM 00161
Italy

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