期刊
PROCEEDINGS OF THE NATIONAL ACADEMY OF SCIENCES OF THE UNITED STATES OF AMERICA
卷 108, 期 31, 页码 12647-12652出版社
NATL ACAD SCIENCES
DOI: 10.1073/pnas.1105882108
关键词
financial stability; global financial markets; financial regulation
资金
- John Templeton Foundation
- Man Group and Fidelity Management and Research
- New College, Oxford University
- Oxford-Man Institute of Quantitative Finance
The global financial crisis of 2007-2009 exposed critical weaknesses in the financial system. Many proposals for financial reform address the need for systemic regulation-that is, regulation focused on the soundness of the whole financial system and not just that of individual institutions. In this paper, we study one particular problem faced by a systemic regulator: the tension between the distribution of assets that individual banks would like to hold and the distribution across banks that best supports system stability if greater weight is given to avoiding multiple bank failures. By diversifying its risks, a bank lowers its own probability of failure. However, if many banks diversify their risks in similar ways, then the probability of multiple failures can increase. As more banks fail simultaneously, the economic disruption tends to increase disproportionately. We show that, in model systems, the expected systemic cost of multiple failures can be largely explained by two global parameters of risk exposure and diversity, which can be assessed in terms of the risk exposures of individual actors. This observation hints at the possibility of regulatory intervention to promote systemic stability by incentivizing a more diverse diversification among banks. Such intervention offers the prospect of an additional lever in the armory of regulators, potentially allowing some combination of improved system stability and reduced need for additional capital.
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