Central Banks, Systemic Risk and Financial Sector Structural Reform
Rosa Lastra and Peter Conti-Brown (Eds.), Research Handbook on Central Banking (Forthcoming)
30 Pages Posted: 15 Jan 2018
Date Written: January 10, 2018
This chapter contribution to an edited volume examines financial sector structural reform as a critical, though largely under-appreciated to date, dimension of central banks’ post-crisis systemic risk prevention agenda. By limiting the range of permissible transactions or organizational affiliations among different types of financial firms, structural reforms alter the fundamental pattern of interconnectedness in the financial system. In that sense, the chapter argues, reforming the institutional structure of the financial industry operates as a deeper form of the currently evolving macroprudential regulation.
The chapter identifies three principal models that form a continuum of potential financial sector structural reform choices and applies this conceptual framework to analysis of post-crisis structural reforms in the U.K., EU, and U.S. It further examines how deeply issues of financial industry structure are embedded in central banks’ regulatory and policy agenda and, in light of this connection, discusses potential implications of current structural reforms for central banks’ post-crisis financial stability mandate.
Keywords: Financial Regulation, Central Banking, Federal Reserve, Financial Sector Structural Reform, Bank Structural Reform, Systemic Risk, Macroprudential Regulation, Structural Separation, Volcker Rule, Glass-Steagall, Ring-Fencing, Lender of Last Resort, Boundary Problem, Regulatory Capacity
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