Systemic Risk, Crises, And Macroprudential Regulation

Hardcover | June 19, 2015

byXavier Freixas, Luc Laeven, José-luis Peydró

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The recent financial crisis has shattered all standard approaches to banking regulation. Regulators now recognize that banking regulation cannot be simply based on individual financial institutions' risks. Instead, systemic risk and macroprudential regulation have come to the forefront of the new regulatory paradigm. Yet our knowledge of these two core aspects of regulation is still limited and fragmented. This book offers a framework for understanding the reasons for the regulatory shift from a microprudential to a macroprudential approach to financial regulation. It defines systemic risk and macroprudential policy, cutting through the generalized confusion as to their meaning; contrasts macroprudential to microprudential approaches; discusses the interaction of macroprudential policy with macroeconomic policy (monetary policy in particular); and describes macroprudential tools and experiences with macroprudential regulation around the world.

The book also considers the remaining challenges for establishing effective macroprudential policy and broader issues in regulatory reform. These include the optimal size and structure of the financial system, the multiplicity of regulatory bodies in the United States, the supervision of cross-border financial institutions, and the need for international cooperation on macroprudential policies.

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The recent financial crisis has shattered all standard approaches to banking regulation. Regulators now recognize that banking regulation cannot be simply based on individual financial institutions' risks. Instead, systemic risk and macroprudential regulation have come to the forefront of the new regulatory paradigm. Yet our knowledge ...

Xavier Freixas is Professor of Financial Economics at the Universitat Pompeu Fabra, and Barcelona Graduate School of Economics and coauthor of Microeconomics of Banking (MIT Press). Luc Laeven is Lead Economist in the Research Department of the International Monetary Fund and coeditor of Deposit Insurance around the World (MIT Press)...

other books by Xavier Freixas

Microeconomics of Banking
Microeconomics of Banking

Hardcover|Mar 14 2008

$92.56 online$104.00list price(save 11%)
Format:HardcoverDimensions:488 pages, 9 × 6 × 0.81 inPublished:June 19, 2015Publisher:The MIT PressLanguage:English

The following ISBNs are associated with this title:

ISBN - 10:0262028697

ISBN - 13:9780262028691

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'Systemic risk' and 'macroprudential' regulation are the new buzzwords in the macro/banking literatures. After the recent crisis, academics got busy assembling lists of all the things that can go wrong in the financial system and all the things that policy makers might do to prevent problems. Amassing lists, however, equates all potential threats and policy responses and ignores the costs of complicating existing monetary policy and prudential regulation by introducing many new cyclical regulatory policy tools. In contrast, Freixas, Laeven, and Peydró come to grips with systemic risk in a practical way; combining theory and evidence, the authors manage to be both comprehensive and selective. This must-read book carefully defines systemic risk, considers all its dimensions, identifies the greatest sources of systemic risk (lending booms), and suggests a simple policy approach that avoids the pitfalls that are common in less thoughtful analyses of macroprudential regulation.