Financial Stability Frameworks and the Role of Central Banks: Lessons from the Crisis

By E. Nier. Social Science Research Network, 2009

114 citations recorded by the source corpus.

This paper sets out general principles for the design of financial stability frameworks, starting from an analysis of the objectives and tools of financial regulation. The paper then offers a comprehensive analysis of the costs and benefits of the two main models that have emerged for modern financial systems: the integrated model, with a single supervisor outside of the central bank, and the twin-peaks model, with a systemic risk regulator (central bank) on the one hand and a conduct of business regulator on the other. The paper concludes that the twin-peaks model may become more attractive when regulatory structures are geared more explicitly towards the mitigation of systemic risk-including through the introduction of new macroprudential tools that could be used alongside monetary policy to contain macro-systemic risks; through enhanced regulation and special resolution regimes for systemically important institutions; and a more holistic approach to the oversight of clearing and settlement systems. Since the optimal solution may well be path-dependent and specific to the development of financial markets in any given country, a number of hybrid models are also discussed.

Subfields: Finance

View Paper: https://www.semanticscholar.org/paper/2065c3989b224e8fe2784dd70b1e15b2222542b9

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In Finance

1. Rangan Gupta
2. Juncal Cunado
3. Aviral Kumar Tiwari
4. M. Wohar
5. Paweł Smaga
6. Elie Bouri
7. David Roubaud

Citations in the corpus

• Volatility spillovers across global asset classes: Evidence from time and frequency domains (2018, background): “…any remaining errors are solely ours. is not only important from a regulatory point of view (Kashyap et al., 2008; Brunnermeier et al., 2009; Nier, 2009), but it also has implications for portfolio diversification (Ang and Bekaert, 2002; Aït-Sahalia and Hurd, 2016), hedging strategies…”
• The Concept of Systemic Risk (2014, background): “Nier (2009) indicates that macro-systemic risk arises when the financial system becomes exposed to aggregate risk, resulting from, e.g. growth of correlated exposures.”