In mid-September 2008, following the bankruptcy of Lehman Brothers, international interbank markets froze and interbank lending beyond very short maturities virtually evaporated. Despite massive central bank support operations and purchases of key assets, many financial markets remained impaired...

This article provides a road map to financial stability. The roadmap is created by analyzing successive episodes of financial crisis at various points in time and the regulatory-cum-supervisory responses devised to reduce the chance of future threats to systemic stability. This article provides...

In this paper we describe systemic financial risk as a pollution issue. Free riding leads to excess risk production. This problem may be solved, at least partially, either with financial regulation or taxation. From a normative viewpoint taxation is superior in many respects. However, reality...

During the recent financial crisis, the Federal Reserve implemented a series of extraordinary and unconventional policies to alleviate the impact of the crisis on financial markets and the economy. In this paper, we examine the effects of these policies on broad financial market conditions,...

The financial crisis that began in 2007 has revealed a need for a new supervisory and regulatory approach aimed at strengthening the system and containing the risk of future financial and economic disruptions. Three ingredients are needed to ensure financial stability: robust analysis, better...

Can tight and centralized financial regulations prevent financial crises? Governments usually respond to financial crises with tightening and centralizing financial regulations. In this paper, we explore the historical parallels between the governmental responses to the financial crises at the...

Financial crises can happen for a variety of reasons: (a) nobody really understands what is going on (the collective cognition paradigm); (b) some understand better than others and take advantage of their knowledge (the asymmetric information paradigm); (c) everybody understands, but crises are...

The UK is redesigning the institutional architecture of financial services supervision. The Financial Conduct Authority is meant to play a central role in the reformed system by delivering a new policy approach to the supervision of financial services conduct, which places considerable emphasis...

This article analyzes the manifold situations in which the efficient-market hypothesis (EMH) has influenced — or has failed to influence — federal securities regulation and state corporate law, and the prospective roles for the EMH in these contexts. In federal securities regulation, the EMH...

This paper focuses on the need for a lex specialis for resolution of insolvent banks and other financial institutions serving similar functions, and on requirements for making resolution procedures effective. After a review of the objectives of general insolvency law and the special...