This testimony is based on the results of Prof. Schwarcz's research over the past year on systemic risk, such research and results being more fully set forth in the forthcoming paper, quot;Systemic Risk,quot; which is available at http://papers.ssrn.com/abstract=1008326

This essay, prepared for a University of Cambridge conference on Principles Versus Rules in Financial Regulation, posits a new issue in that debate. Although principles-based regulation is thought to more closely achieve normative goals than rules, the extent to which that occurs can depend on...