Excessive credit growth and high asset prices increase systemic risks. Because, in equilibrium, these two variables are jointly determined the analysis of systemic risk and the cost-benefit analysis of macroprudential regulation require a specific framework consistent with the existing empirical...

Prudential bank supervision is designed to enhance financial stability, but we are unaware of research linking this supervision to financial system risk. In particular, there are no prior findings on how supervisory enforcement actions (EAs) – major tools of supervisors – affect systemic...

This paper investigates the effectiveness of macroprudential policy to contain the systemic risk of European banks between 2000 and 2017. We use a new database (MaPPED) collected by experts at the ECB and national central banks with narrative information on a broad range of instruments which are...

Since increasing a bank's capital requirement to improve the stability of the financial system imposes costs upon the bank, a regulator should ideally be able to prove beyond a reasonable doubt that banks classified as systemically risky really do create systemic risk before subjecting them to...

The cost of systemic risk in the over-the-counter (OTC) derivatives market is described and estimated. Modern portfolio theory (MPT), applied to OTC derivatives, predicts this cost, which has been growing since 1970. This cost grew because Congress blocked MPT's predicted market forces. Without...

One of the main challenges for the regulatory authorities in the aftermath of the last financial crisis is to define pragmatical and practicable risk concepts for the control and the regulation of systemic risks. They need for this purpose risk models that on one hand can capture the macro...

Central clearing of standardised financial instruments, as promoted by the G20 Leaders, addresses some of the financial stability risks that materialised during the Great Financial Crisis. Its rapid evolution since 2009 may have changed the linkages between central counterparties and the rest of...

This paper analyzes the effects of new capital requirements for systematically important financial institutions proposed by the Federal Reserve on September 8, 2014. Results from an event study indicate this announcement led to lower abnormal initial stock returns for systemically important...

The G20's push towards central clearing changed the shape of the world's financial system: all standardized derivative contracts must now be cleared through central counterparties (CCPs). Despite considerable debate, the impact of central clearing nonetheless remains ambiguous and hard to...