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Regulating Risk: A Measured Response to the Banking Crisis

McIlroy, David H. (2008) 'Regulating Risk: A Measured Response to the Banking Crisis.' Journal of Banking Regulation, 9 (4). pp. 284-292.

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Abstract

This paper argues that regulatory responses to the sub-prime crisis ought to be guided by the fundamental principle that bank regulation is justified by the adverse consequences of banks taking excessive risks. It therefore proposes three reforms: requiring banks to retain a proportion of any loan which they originate, so as to reduce the risks of moral hazard; insisting that the risks involved in the financial products in which banks trade are transparent; and reforming Basel II so that the amounts of regulatory capital which banks are required to hold are less pro-cylical than is currently the case.

Item Type: Articles
Keywords: ORIGINATE AND DISTRIBUTE; SECURITISATION; MORAL HAZARD; RISK TRANSPARENCY; BASEL II; TOO BIG TO FAIL
SOAS Departments & Centres: Faculty of Law and Social Sciences > School of Law
ISSN: 17456452
DOI (Digital Object Identifier): 10.1057/jbr.2008.15
Depositing User: David McIlroy
Date Deposited: 29 Sep 2008 14:27
URI: http://eprints.soas.ac.uk/id/eprint/5405

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