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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).

Regulate shadow banks along the same lines as commercial banks.

Regulatory arbitrage has been an important driver of the financial crisis. Very risky business was conducted by shadow banks, set up by seemingly independent mother institutions. These hidden exposures brought many of these mother institutions close to collapse.

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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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    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
    Solution
    Symposium 2011

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

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

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

    Polity, Business