Monday, January 26, 2009

The Fundamental Principles of Financial Regulation

Geneva Reports on the World Economy 11

Markus Brunnermeier (Princeton University and CEPR), Andrew Crocket (JPMorgan Chase), Charles Goodhart (London School of Economics), Avinash D. Persaud (Chairman. Intelligence Capital Limited) and Hyun Shin (Princeton University and CEPR)

Chapter 1: Analytical Background

Chapter 2: Nature of Systemic Risk
2.1 Solvency, Liquidity and Maturity Mismatch
2.2 Funding Liquidity and the Domino Effect
2.3 Loss Spiral-Asset Price Effect
2.4 Margin/Haircut Spiral
2.5 Procyclicality and Margin Spirals
2.6 Externalities-Rationale for Regulation
2.7 Aggregate Liquidity Expansions and Contractions

Chapter 3 : Who Should be Regulated (by Whom)
3.1 Classification of Financial Institutions based on Objective Risk
Spillover Measures
3.2 Rules for Individually Systemic Institutions
3.3 Rules for Institutions that are “Systemic in a Herd”
3.4 International Considerations for International Entities

Chapter 4 : Counter cyclical Regulation
4.1 Focus on Systemic Risk Spillover
4.2 When to look Out for Systemic Risk?
4.3 How to modify CAR?
4.4 More on Bank Capital : Two Notions
4.5 Ladder of Responses
4.6 Forced Debt-Equity Conversion
4.7 Clear Incentives for Regulators : Rules versus Discretion
4.8 Cross-country Considerations
4.9 Contrast to Spanish Dynamic Provision Mechanism
4.10 Conclusion

Chapter 5 : Regulation of Liquidity and Maturity Mismatches
5.1 Focussing solely on Assets
5.2 Funding Liquidity and Maturity Mismatch
5.3 Mark to Funding-A New Accounting Rule
5.4 Capital Charges against Illiquidity

Chapter 6 : Other Regulatory Issues
6.1 Introduction
6.2 Remuneration
6.3 Loan to Value Ratios in Mortgages
6.4 Credit Rating Agencies
6.5 Centralized Clearing House Arrangements vs. OTC Markets
6.6 Year-end Spikes
7.7 Crisis Management

Chapter 7 : The Structure of Regulation

Chapter 8 : Conclusions
8.1 General Conclusions and Recommendations
8.2 Capital Requirements
8.3 Liquidity
8.4 Other Considerations

Appendix : The Boundary Problem in Financial Regulation

Endnotes

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