Microsystemic Regulation: A Perspective on Latin America and the Caribbean

Abstract

No AccessDec 2013Microsystemic Regulation: A Perspective on Latin America and the CaribbeanAuthors/Editors: Mariano Cortés, Miquel Dijkman, Eva GutierrezMariano CortésSearch for more papers by this author, Miquel DijkmanSearch for more papers by this author, Eva GutierrezSearch for more papers by this authorhttps://doi.org/10.1596/978-0-8213-9828-9_ch10AboutView ChaptersFull TextPDF (0.1 MB) ToolsAdd to favoritesDownload CitationsTrack Citations ShareFacebookTwitterLinked In Abstract: Reviews some proposed measures for microsystemic regulation, discussing their pros and cons, and reflecting on measures most appropriate for countries in Latin America and the Caribbean (LAC). The global financial crisis underlined the need for better monitoring and management of systemic risk, and a macroprudential approach to oversight, proposed with a view toward mitigating systemic risk, remains under development. From a microsystemic risk perspective, such a framework aims to remove incentives for a cross-sectional accumulation of systemic risk, a goal which calls for extending regulatory perimeters and homogenizing regulations across different intermediaries to avoid regulatory arbitrage. Significant challenges associated with financial institutions exist, which can generate bailout expectations and induce moral hazard behavior that prompts even greater accumulation of systemic risks. Financial systems may have to intermediate large capital inflows to LAC with the potential for a substantial buildup of systemic risk and compel policymakers to take decisive action. ReferencesBarth, J, G Caprio, and R Levine. 2013. “Bank regulation and supervision in 180 countries from 1999 to 2011.” NEBR working paper No. 18733. National Bureau of Economic Research Inc. Google ScholarBCBS. 2009. Enhancements to the Basel II Framework. Basel: Bank for international settlements. Google ScholarBCBS (Basel Committee on Banking Supervision). 2010a. Report and Recommendations of the Cross-Border Bank Resolution Group. Basel: Bank for International Settlements. Google ScholarBCBS (Basel Committee on Banking Supervision). 2010b. Proposal to Ensure the Loss Absorbency of Regulatory Capital at the Point of Non-Viability. Basel: Bank for International Settlements. Google ScholarBCBS (Basel Committee on Banking Supervision). 2010c. Basel III: A Global Regulatory Framework for More Resilient Banks and Banking Systems. Basel: Bank for International Settlements. Google ScholarBCBS (Basel Committee on Banking Supervision). 2011. Global Systemically Important Banks: Assessment Methodology and the Additional Loss Absorbency Requirement. Basel: Bank for International Settlements. Google ScholarBCBS (Basel Committee on Banking Supervision). 2012. A Framework for Dealing with Domestic Systemically Important Banks. Basel: Bank for International Settlements. Google ScholarBischof, J, U Brüggemann, and D Holger. 2010. “Relaxation of Fair Value Rules in Times of Crisis: An Analysis of Economic Benefits and Costs of the Amendment to IAS 39.” Social Science Research Network Working Paper Series. ssrn.com/abstract=1628843 or http://dx.doi.org/10.2139/ssrn.1628843. Google ScholarBrunnermeier, M, A Crocket, C Goodhart, A Persaud, and H Shin. 2009. “The Fundamental Principles of Financial Regulation.” Geneva Reports on the World Economy, Preliminary Conference Draft. International Center for Monetary and Banking Studies. Google ScholarCaravajal, A, R Dodd, M Moore, E Nier, I Tower, and L Zanforlin. 2009. “The Perimeter of Financial Regulation.” IMF Staff Position Note, SPN/09/07, International Monetary Fund, Washington, DC. Google ScholarCarmichael, J and M Pomerleano. 2002. The Development and Regulation of Nonbank Financial Institutions. Washington, DC: World Bank. LinkGoogle ScholarCaruana, J 2009. “The International Policy Response to the Financial Crises: Making the Macroprudential Approach Operational.” Panel remarks at Jackson Hole, Wyoming, August 21–22. Google ScholarChan, Norma T L 2011. “Universal Banking—Hong Kong’s Perspective.” Keynote Address at the Opening Session of the Asian Banker Summit in Hong Kong, April 7. Google ScholarCommittee on Global Financial Stability. 2008. “Central Bank Operations in Response to Financial Turmoil.” CGFS Paper 38, Committee on Global Financial Stability, Basel. Google ScholarCrockett, A 2000. “Marrying the Micro- and Macroprudential Dimensions of Financial Stability.” BIS Paper 1, Bank for International Settlements, Basel. Google Scholarde la Torre, A, E Feyen, and A Ize. 2013. “Financial Development: Structure and Dynamics.” World Bank Economic Review (February). http://wber.oxfordjournals.org/content/early/2013/02/26/wber.lht005.short. Google Scholarde la Torre, A and A Ize. 2009. “Regulatory Reform: Integrating Paradigms.” Policy Research Working Paper 4842, World Bank, Washington, DC. Google Scholarde la Torre, A and A Ize. 2011. “Containing Systemic Risk: Paradigm-Based Perspectives on Regulatory Reform.” Policy Research Working Paper 5523, World Bank, Washington, DC. Google ScholarDewatripont, M, J C Rochet, and J Tirole. 2010. Balancing the Banks: Global Lessons from the Financial Crisis. Princeton and Oxford: Princeton University Press. CrossrefGoogle ScholarDijkman, M 2010. “A Framework for Assessing Systemic Risk.” Policy Research Working Paper 5282, World Bank, Washington, DC. Google ScholarEC (European Commission). 2010. “Commission Services Non-Paper on Bank Levies for Discussion at ECOFIN.” September. Google ScholarFinancial Stability Oversight Council. 2011. “Study and Recommendations on Prohibitions on Proprietary Trading and Certain Relationships with Hedge Funds and Private Equity Funds.” U.S. Treasury. http://www.treasury.gov/initiatives/documents/volcker%20sec%20%20619%20study%20final%201%2018%2011%20rg.pdf. Google ScholarFSB (Financial Stability Board. 2010. Reducing the Moral Hazard Posed by Systemically Important Financial Institutions: Interim Report to G-20 Leaders. Google ScholarGoldstein, M and N Veron. 2011. “Too Big to Fail: The Transatlantic Debate.” Working Paper 11-2, Peterson Institute for International Economics, Washington, DC. Google ScholarGutierrez, E and P Caraballo. 2012. “Systemic Oversight Frameworks in LAC: Current Practices and Reform Agenda.” Policy Research Working Paper 5941, World Bank, Washington, DC. Google ScholarHaldane, A 2009. “Rethinking the Financial Network.” Speech delivered at the Financial Student Association, Amsterdam, April. Google ScholarIMF (International Monetary Fund). 2009. “Detecting Systemic Risk.” In Global Financial Stability Report, chapter 3, 111–49. Washington, DC: IMF. Google ScholarIMF (International Monetary Fund). 2010a. “Systemic Risk and the Redesign of Financial Regulation.” In Global Financial Stability Report, chapter 2, 73–110. Washington, DC: IMF. Google ScholarIMF (International Monetary Fund). 2010b. A Fair and Substantial Contribution by the Financial Sector: Final Report for the G-20. Washington, DC: IMF. Google ScholarIMF (International Monetary Fund). 2010c. “Systemic Liquidity Risk: Improving the Resilience of Financial Institutions and Markets.” In Global Financial Stability Report, chap. 2, 57–83. Washington, DC: IMF. Google ScholarIMF, BIS, and Financial Stability Board. 2009. “Guidance to Assess the Systemic Importance of Financial Institutions, Markets and Instruments: Initial Considerations: Report to G20 Finance Ministers and Governors.” Google ScholarJoint Forum, BCBS. 2010. “Review of the Differentiated Nature and Scope of Financial Regulation: Key Issues and Recommendations.” Press release, January 8. Google ScholarKay, J 2010. “Should We Have ‘Narrow Banking’?” In The Future of Finance and the Theory That Underpins It, chap. 8. London: London School of Economics. Google ScholarKotlikoff, (2010). Jimmy Stewart is Dead: Ending the World’s Financial Plague Before it Starts Again. John Wiley and Sons Inc. Google ScholarMesquita, M and M Torós. 2010. “Brazil and the 2008 Panic.” In The Global Crisis and Financial Intermediation in Emerging Market Economies, 113–20. Basel: Bank for International Settlements. Google ScholarMorrison-Foerster. 2011. “ICB Interim Report on UK Banking Reform.” News Bulletin, April 29. http://www.mofo.com/files/Uploads/Images/110429-ICB-Report-UK-Banking-Reform.pdf. Google ScholarSquam Lake Working Group on Financial Regulation. 2009. “Improving Resolution Options for Systemically Relevant Financial Institution.” Council on Foreign Relations Working Paper. Google ScholarThomson, J 2009. “On Systemically Important Financial Institutions and Progressive Systemic Risk Migration.” Policy Discussion Paper 27, Federal Reserve Bank of Cleveland, Cleveland. Google Scholar Previous chapterNext chapter FiguresreferencesRecommendeddetails View Published: December 2013ISBN: 978-0-8213-9828-9e-ISBN: 978-0-8213-9956-9 Copyright & Permissions Related RegionsLatin America & CaribbeanRelated TopicsFinance and Financial Sector Development KeywordsARBITRAGEBAILOUTSBANK SUPERVISIONCAPITAL MARKETSFINANCIAL CRISISFINANCIAL POLICYFINANCIAL REGULATIONFINANCIAL SECTORFINANCIAL STABILITYLIQUIDITY REQUIREMENTSMACROPRUDENTIAL POLICYMICROECONOMICSMONETARY POLICYPRUDENTIAL OVERSIGHTREGULATORY REFORMRISK MANAGEMENT PDF DownloadLoading ...