This article derives a model of self-regulation where banks issue insurance products to hedge their leverage ratio. This approach is an alternative policy to Basel regulation for controlling systemic risk without increasing equity level. We show some conditions under which the model can be...

The post-crisis financial reforms address the need for systemic regulation, focused not only on individual banks but also on the whole financial system. The regulator principal objective is to set banks' capital requirements equal to international minimum standards in order to mimimise systemic...

This article derives a model of self-regulation where banks issue insurance products to hedge their own leverage ratio. This approach is an alternative policy to Basel regulation for controlling systemic risk without increasing equity level.Then, we construct two insurability indicators...