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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).

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

Policy-makers do not have sufficient information to understand the potential repercussions of the default of a systemically important financial institution (SIFI). The collapse of Lehman Brothers is a particularly good example. The current situation in Europe, with Greece at the brink of a default, is another one. It is necessary to register each and every financial transaction, including “over-the-counter” derivatives.

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