Systemic Risk and Regulation
Wharton Financial Institutions Center Working Paper No. 95-24
35 Pages Posted: 30 Aug 2005
Date Written: 2005
Abstract
Historically, much of the banking regulation that was put in place was designed to reduce systemic risk. In many countries capital regulation in the form of the Basel agreements is currently one of the most important measures to reduce systemic risk. In recent years there has been considerable growth in the transfer of credit risk across and between sectors of the financial system. In particular there is evidence that risk has been transfered from the banking sector to the insurance sector. One argument is that this is desirable and simply reflects diversification opportunities. Another is that it represents regulatory arbitrage and the concentration of risk that may result from this could increase systemic risk. This paper shows that both scenarios are possible depending on whether markets and contracts are complete or incomplete.
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Innovations in Credit Risk Transfer: Implications for Financial Stability
-
Credit Derivatives, Disintermediation and Investment Decisions
-
Credit Risk Transfer and Contagion
By Franklin Allen and Elena Carletti
-
Systemic Risk in the Financial Sector: An Analysis of the Subprime-Mortgage Financial Crisis
-
Credit Risk Transfer and Financial Sector Performance
By Wolf Wagner and Ian W. Marsh
-
Credit Risk Transfer and Financial Sector Performance
By Wolf Wagner and Ian W. Marsh
-
Default Risk Sharing between Banks and Markets: The Contribution of Collateralized Debt Obligations
By Guenter Franke and Jan Pieter Krahnen
-
The Liquidity of Bank Assets and Banking Stability
By Wolf Wagner