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Symposium 2011

Solution for Coping with Systemic Risk

The Challenge

The global financial crisis has revealed how systemic risk in the banking system can lead to huge economic downturns. Many of the problems leading to the crisis have been discussed and many suspects h ...

The global financial crisis has revealed how systemic risk in the banking system can lead to huge economic downturns. Many of the problems leading to the crisis have been discussed and many suspects have been identified (including investment banks, central banks, rating agencies, regulators and the economics profession).

Impose minimum standards on loans (loan-to-value and debt-to-income) to reduce excessive borrowing.

Excessive household borrowing in the US has been another important driver of the financial crisis. Minimum lending standards would reduce the exposure of the financial system to private households whose creditworthiness is dubious. Similar arguments hold with respect to sovereign debt.

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    Symposium 2011

    Central banks’ objectives should include not only price stability but also financial stability.

    Central banks’ objectives should include not only price stability but also financial stability.

    Central banks’ objectives should include not only price stability but also financial stability.

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    Regulators should collect more data on financial transactions to assess the repercussions of financial defaults.

    Regulators should collect more data on financial transactions to assess the repercussions of financial defaults.

    Regulators should collect more data on financial transactions to assess the repercussions of financial defaults.

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    Regulate shadow banks along the same lines as commercial banks.

    Regulate shadow banks along the same lines as commercial banks.

    Regulate shadow banks along the same lines as commercial banks.

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    Solution
    Symposium 2011

    Find an internationally coherent definition of “systemic importance” (meaning “too big and complex to fail”).

    Find an internationally coherent definition of “systemic importance” (meaning “too big and complex to fail”).

    Find an internationally coherent definition of “systemic importance” (meaning “too big and complex to fail”).

    Polity, Civil Society