Regulatory Reform : Integrating Paradigms
The Subprime crisis largely resulted from failures to internalize systemic risk evenly across financial intermediaries and recognize the implications of Knightian uncertainty and mood swings. A successful reform of prudential regulation will need t...
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| Format: | Policy Research Working Paper |
| Language: | English |
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2012
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| Online Access: | http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090504085341 http://hdl.handle.net/10986/4118 |
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okr-10986-4118 |
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| recordtype |
oai_dc |
| repository_type |
Digital Repository |
| institution_category |
Foreign Institution |
| institution |
Digital Repositories |
| building |
World Bank Open Knowledge Repository |
| collection |
World Bank |
| language |
English |
| topic |
ACCOUNTABILITY ACCOUNTING ADVERSE SELECTION AGENCY PROBLEM AGENCY PROBLEMS ARBITRAGE ASSET MANAGERS ASSET PRICE ASSET PRICES ASYMMETRIC INFORMATION BAILOUTS BALANCE SHEET BALANCE SHEETS BANK EARNINGS BANK FAILURE BANK FAILURE RESOLUTION BANKING SECTOR BANKING SYSTEM BID BORROWER BROKERAGE BROKERAGE ACTIVITIES BROKERS BUSINESS CYCLE BUSINESS OPPORTUNITIES CAPITAL ADEQUACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CAPITAL RATIOS CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANKS CHANNEL OF FINANCE COLLECTIVE ACTION COMMERCIAL BANKING COMMERCIAL BANKS CONSOLIDATED SUPERVISION CONSUMER PROTECTION CONTRACT ENFORCEMENT COORDINATION FAILURE COORDINATION FAILURES CREDIT CHAIN CREDIT DEFAULT CREDIT DEFAULT SWAPS CREDIT DERIVATIVES CREDIT ENHANCEMENTS CREDIT LINES CREDIT MARKET CREDIT RISK CREDIT RISK EXPOSURES CREDITWORTHY BORROWERS DEBT DEBT CONTRACTS DEPOSIT DEPOSIT INSURANCE DEPOSIT RATES DEPOSITOR DEPOSITORS DEPOSITS DEREGULATION DERIVATIVE DERIVATIVE CONTRACTS DERIVATIVE MARKETS ECONOMIC CONDITIONS EFFECTIVE GOVERNANCE EQUITY INVESTMENTS EQUITY SWAPS EXCHANGE RATE EXPOSURE EXTENSION OF CREDIT EXTERNALITIES FAIR VALUE FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL CONGLOMERATES FINANCIAL CONTRACTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL DEVELOPMENT FINANCIAL DEVELOPMENTS FINANCIAL DISTRESS FINANCIAL FLOWS FINANCIAL INNOVATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKET PARTICIPANTS FINANCIAL MARKETS FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FRAUD GOVERNANCE ISSUES GOVERNANCE STANDARDS GOVERNMENT INTERVENTION HEDGE FUNDS HOLDING HOUSING HOUSING FINANCE HOUSING PRICES INFLATION INFORMATION ASYMMETRY INFORMED INVESTORS INSTRUMENT INSURANCE INSURANCE COMPANIES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INVESTING INVESTMENT BANKING INVESTMENT BANKS INVESTMENT OPPORTUNITIES INVESTMENT VEHICLES INVESTOR PROTECTION LEGISLATION LENDER-OF-LAST-RESORT LENDERS LEVY LIMITED LIABILITY LIQUID ASSETS LIQUID SECONDARY MARKETS LIQUIDITY LIQUIDITY CRISES LIQUIDITY FACILITIES LIQUIDITY RISK LOAN MALFEASANCE MANDATES MARKET DEVELOPMENT MARKET DISCIPLINE MARKET FAILURE MARKET FAILURES MARKET LIQUIDITY MARKET PARTICIPANTS MARKET PLAYERS MARKET RISKS MARKET VALUES MARKET-MAKING MATURITY MATURITY GAP MATURITY MISMATCHES MATURITY STRUCTURE MONETARY AUTHORITIES MONETARY POLICY MORAL HAZARD MORTGAGE MORTGAGE LENDING MORTGAGE-BACKED SECURITIES MORTGAGES MUTUAL FUNDS NEW MARKETS OPPORTUNISTIC BEHAVIOR OVERNIGHT REPOS PENSION PENSION FUNDS POLICY RESPONSES PORTFOLIO PORTFOLIOS PRICE RISK PRICE VOLATILITY PRINCIPAL-AGENT PROBLEM PRINCIPAL-AGENT PROBLEMS PRUDENTIAL REGULATION PRUDENTIAL REGULATIONS PRUDENTIAL REQUIREMENTS PRUDENTIAL STANDARDS PUBLIC FUNDS PUBLIC LENDER PUBLIC POLICY RATING AGENCIES REAL SECTOR REGULATOR REGULATORS REGULATORY FORBEARANCE REGULATORY FRAMEWORK REGULATORY REQUIREMENTS REPAYMENT REPAYMENTS REPUTATION RETURNS RISK AVERSION RISK MANAGEMENT RISK MANAGERS RISK PREMIUM RISK TAKING RISK WEIGHT RISK WEIGHTS RISKY ASSETS SAFETY NET SALE OF MORTGAGE SAVINGS SECURITIES SECURITIES MARKET SECURITIES MARKETS SHAREHOLDERS SHORT-TERM LIABILITIES SMALL BORROWER SOCIAL COST SOCIAL COSTS SOCIAL RISKS STOCK MARKET STOCK MARKET PRICE STOCK PRICES STOCK TRADING STOCKS SWAP SYSTEMIC RISK SYSTEMIC RISKS TRADING TRADITIONAL BANKING TRANCHES TRANSACTION TRANSACTION COSTS TRANSPARENCY TREASURY UNDERLYING ASSET UNIVERSAL BANKING VALUATIONS WHOLESALE FINANCE WHOLESALE INVESTORS |
| spellingShingle |
ACCOUNTABILITY ACCOUNTING ADVERSE SELECTION AGENCY PROBLEM AGENCY PROBLEMS ARBITRAGE ASSET MANAGERS ASSET PRICE ASSET PRICES ASYMMETRIC INFORMATION BAILOUTS BALANCE SHEET BALANCE SHEETS BANK EARNINGS BANK FAILURE BANK FAILURE RESOLUTION BANKING SECTOR BANKING SYSTEM BID BORROWER BROKERAGE BROKERAGE ACTIVITIES BROKERS BUSINESS CYCLE BUSINESS OPPORTUNITIES CAPITAL ADEQUACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CAPITAL RATIOS CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANKS CHANNEL OF FINANCE COLLECTIVE ACTION COMMERCIAL BANKING COMMERCIAL BANKS CONSOLIDATED SUPERVISION CONSUMER PROTECTION CONTRACT ENFORCEMENT COORDINATION FAILURE COORDINATION FAILURES CREDIT CHAIN CREDIT DEFAULT CREDIT DEFAULT SWAPS CREDIT DERIVATIVES CREDIT ENHANCEMENTS CREDIT LINES CREDIT MARKET CREDIT RISK CREDIT RISK EXPOSURES CREDITWORTHY BORROWERS DEBT DEBT CONTRACTS DEPOSIT DEPOSIT INSURANCE DEPOSIT RATES DEPOSITOR DEPOSITORS DEPOSITS DEREGULATION DERIVATIVE DERIVATIVE CONTRACTS DERIVATIVE MARKETS ECONOMIC CONDITIONS EFFECTIVE GOVERNANCE EQUITY INVESTMENTS EQUITY SWAPS EXCHANGE RATE EXPOSURE EXTENSION OF CREDIT EXTERNALITIES FAIR VALUE FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL CONGLOMERATES FINANCIAL CONTRACTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL DEVELOPMENT FINANCIAL DEVELOPMENTS FINANCIAL DISTRESS FINANCIAL FLOWS FINANCIAL INNOVATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKET PARTICIPANTS FINANCIAL MARKETS FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FRAUD GOVERNANCE ISSUES GOVERNANCE STANDARDS GOVERNMENT INTERVENTION HEDGE FUNDS HOLDING HOUSING HOUSING FINANCE HOUSING PRICES INFLATION INFORMATION ASYMMETRY INFORMED INVESTORS INSTRUMENT INSURANCE INSURANCE COMPANIES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INVESTING INVESTMENT BANKING INVESTMENT BANKS INVESTMENT OPPORTUNITIES INVESTMENT VEHICLES INVESTOR PROTECTION LEGISLATION LENDER-OF-LAST-RESORT LENDERS LEVY LIMITED LIABILITY LIQUID ASSETS LIQUID SECONDARY MARKETS LIQUIDITY LIQUIDITY CRISES LIQUIDITY FACILITIES LIQUIDITY RISK LOAN MALFEASANCE MANDATES MARKET DEVELOPMENT MARKET DISCIPLINE MARKET FAILURE MARKET FAILURES MARKET LIQUIDITY MARKET PARTICIPANTS MARKET PLAYERS MARKET RISKS MARKET VALUES MARKET-MAKING MATURITY MATURITY GAP MATURITY MISMATCHES MATURITY STRUCTURE MONETARY AUTHORITIES MONETARY POLICY MORAL HAZARD MORTGAGE MORTGAGE LENDING MORTGAGE-BACKED SECURITIES MORTGAGES MUTUAL FUNDS NEW MARKETS OPPORTUNISTIC BEHAVIOR OVERNIGHT REPOS PENSION PENSION FUNDS POLICY RESPONSES PORTFOLIO PORTFOLIOS PRICE RISK PRICE VOLATILITY PRINCIPAL-AGENT PROBLEM PRINCIPAL-AGENT PROBLEMS PRUDENTIAL REGULATION PRUDENTIAL REGULATIONS PRUDENTIAL REQUIREMENTS PRUDENTIAL STANDARDS PUBLIC FUNDS PUBLIC LENDER PUBLIC POLICY RATING AGENCIES REAL SECTOR REGULATOR REGULATORS REGULATORY FORBEARANCE REGULATORY FRAMEWORK REGULATORY REQUIREMENTS REPAYMENT REPAYMENTS REPUTATION RETURNS RISK AVERSION RISK MANAGEMENT RISK MANAGERS RISK PREMIUM RISK TAKING RISK WEIGHT RISK WEIGHTS RISKY ASSETS SAFETY NET SALE OF MORTGAGE SAVINGS SECURITIES SECURITIES MARKET SECURITIES MARKETS SHAREHOLDERS SHORT-TERM LIABILITIES SMALL BORROWER SOCIAL COST SOCIAL COSTS SOCIAL RISKS STOCK MARKET STOCK MARKET PRICE STOCK PRICES STOCK TRADING STOCKS SWAP SYSTEMIC RISK SYSTEMIC RISKS TRADING TRADITIONAL BANKING TRANCHES TRANSACTION TRANSACTION COSTS TRANSPARENCY TREASURY UNDERLYING ASSET UNIVERSAL BANKING VALUATIONS WHOLESALE FINANCE WHOLESALE INVESTORS de la Torre, Augusto Ize, Alain Regulatory Reform : Integrating Paradigms |
| geographic_facet |
Latin America & Caribbean Latin America & Caribbean |
| relation |
Policy Research working paper ; no. WPS 4842,Proceedings |
| description |
The Subprime crisis largely resulted
from failures to internalize systemic risk evenly across
financial intermediaries and recognize the implications of
Knightian uncertainty and mood swings. A successful reform
of prudential regulation will need to integrate more
harmoniously the three paradigms of moral hazard,
externalities, and uncertainty. This is a tall order because
each paradigm leads to different and often inconsistent
regulatory implications. Moreover, efforts to address the
central problem under one paradigm can make the problems
under the others worse. To avoid regulatory arbitrage and
ensure that externalities are uniformly internalized, all
prudentially regulated intermediaries should be subjected to
the same capital adequacy requirements, and unregulated
intermediaries should be financed only by regulated
intermediaries. Reflecting the importance of uncertainty,
the new regulatory architecture will also need to rely less
on markets and more on "holistic" supervision, and
incorporate countercyclical norms that can be adjusted in
light of changing circumstances. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
de la Torre, Augusto Ize, Alain |
| author_facet |
de la Torre, Augusto Ize, Alain |
| author_sort |
de la Torre, Augusto |
| title |
Regulatory Reform : Integrating Paradigms |
| title_short |
Regulatory Reform : Integrating Paradigms |
| title_full |
Regulatory Reform : Integrating Paradigms |
| title_fullStr |
Regulatory Reform : Integrating Paradigms |
| title_full_unstemmed |
Regulatory Reform : Integrating Paradigms |
| title_sort |
regulatory reform : integrating paradigms |
| publishDate |
2012 |
| url |
http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090504085341 http://hdl.handle.net/10986/4118 |
| _version_ |
1764389996166381568 |
| spelling |
okr-10986-41182021-04-23T14:02:15Z Regulatory Reform : Integrating Paradigms de la Torre, Augusto Ize, Alain ACCOUNTABILITY ACCOUNTING ADVERSE SELECTION AGENCY PROBLEM AGENCY PROBLEMS ARBITRAGE ASSET MANAGERS ASSET PRICE ASSET PRICES ASYMMETRIC INFORMATION BAILOUTS BALANCE SHEET BALANCE SHEETS BANK EARNINGS BANK FAILURE BANK FAILURE RESOLUTION BANKING SECTOR BANKING SYSTEM BID BORROWER BROKERAGE BROKERAGE ACTIVITIES BROKERS BUSINESS CYCLE BUSINESS OPPORTUNITIES CAPITAL ADEQUACY CAPITAL FLOWS CAPITAL MARKET CAPITAL MARKETS CAPITAL RATIOS CAPITAL REQUIREMENTS CENTRAL BANK CENTRAL BANKS CHANNEL OF FINANCE COLLECTIVE ACTION COMMERCIAL BANKING COMMERCIAL BANKS CONSOLIDATED SUPERVISION CONSUMER PROTECTION CONTRACT ENFORCEMENT COORDINATION FAILURE COORDINATION FAILURES CREDIT CHAIN CREDIT DEFAULT CREDIT DEFAULT SWAPS CREDIT DERIVATIVES CREDIT ENHANCEMENTS CREDIT LINES CREDIT MARKET CREDIT RISK CREDIT RISK EXPOSURES CREDITWORTHY BORROWERS DEBT DEBT CONTRACTS DEPOSIT DEPOSIT INSURANCE DEPOSIT RATES DEPOSITOR DEPOSITORS DEPOSITS DEREGULATION DERIVATIVE DERIVATIVE CONTRACTS DERIVATIVE MARKETS ECONOMIC CONDITIONS EFFECTIVE GOVERNANCE EQUITY INVESTMENTS EQUITY SWAPS EXCHANGE RATE EXPOSURE EXTENSION OF CREDIT EXTERNALITIES FAIR VALUE FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL CONGLOMERATES FINANCIAL CONTRACTS FINANCIAL CRISES FINANCIAL CRISIS FINANCIAL DEEPENING FINANCIAL DEVELOPMENT FINANCIAL DEVELOPMENTS FINANCIAL DISTRESS FINANCIAL FLOWS FINANCIAL INNOVATION FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL MANAGEMENT FINANCIAL MARKET FINANCIAL MARKET PARTICIPANTS FINANCIAL MARKETS FINANCIAL REGULATION FINANCIAL SECTOR FINANCIAL STABILITY FINANCIAL SYSTEM FINANCIAL SYSTEMS FRAUD GOVERNANCE ISSUES GOVERNANCE STANDARDS GOVERNMENT INTERVENTION HEDGE FUNDS HOLDING HOUSING HOUSING FINANCE HOUSING PRICES INFLATION INFORMATION ASYMMETRY INFORMED INVESTORS INSTRUMENT INSURANCE INSURANCE COMPANIES INTEREST RATE INTEREST RATES INTERNATIONAL BANK INTERNATIONAL ECONOMICS INVESTING INVESTMENT BANKING INVESTMENT BANKS INVESTMENT OPPORTUNITIES INVESTMENT VEHICLES INVESTOR PROTECTION LEGISLATION LENDER-OF-LAST-RESORT LENDERS LEVY LIMITED LIABILITY LIQUID ASSETS LIQUID SECONDARY MARKETS LIQUIDITY LIQUIDITY CRISES LIQUIDITY FACILITIES LIQUIDITY RISK LOAN MALFEASANCE MANDATES MARKET DEVELOPMENT MARKET DISCIPLINE MARKET FAILURE MARKET FAILURES MARKET LIQUIDITY MARKET PARTICIPANTS MARKET PLAYERS MARKET RISKS MARKET VALUES MARKET-MAKING MATURITY MATURITY GAP MATURITY MISMATCHES MATURITY STRUCTURE MONETARY AUTHORITIES MONETARY POLICY MORAL HAZARD MORTGAGE MORTGAGE LENDING MORTGAGE-BACKED SECURITIES MORTGAGES MUTUAL FUNDS NEW MARKETS OPPORTUNISTIC BEHAVIOR OVERNIGHT REPOS PENSION PENSION FUNDS POLICY RESPONSES PORTFOLIO PORTFOLIOS PRICE RISK PRICE VOLATILITY PRINCIPAL-AGENT PROBLEM PRINCIPAL-AGENT PROBLEMS PRUDENTIAL REGULATION PRUDENTIAL REGULATIONS PRUDENTIAL REQUIREMENTS PRUDENTIAL STANDARDS PUBLIC FUNDS PUBLIC LENDER PUBLIC POLICY RATING AGENCIES REAL SECTOR REGULATOR REGULATORS REGULATORY FORBEARANCE REGULATORY FRAMEWORK REGULATORY REQUIREMENTS REPAYMENT REPAYMENTS REPUTATION RETURNS RISK AVERSION RISK MANAGEMENT RISK MANAGERS RISK PREMIUM RISK TAKING RISK WEIGHT RISK WEIGHTS RISKY ASSETS SAFETY NET SALE OF MORTGAGE SAVINGS SECURITIES SECURITIES MARKET SECURITIES MARKETS SHAREHOLDERS SHORT-TERM LIABILITIES SMALL BORROWER SOCIAL COST SOCIAL COSTS SOCIAL RISKS STOCK MARKET STOCK MARKET PRICE STOCK PRICES STOCK TRADING STOCKS SWAP SYSTEMIC RISK SYSTEMIC RISKS TRADING TRADITIONAL BANKING TRANCHES TRANSACTION TRANSACTION COSTS TRANSPARENCY TREASURY UNDERLYING ASSET UNIVERSAL BANKING VALUATIONS WHOLESALE FINANCE WHOLESALE INVESTORS The Subprime crisis largely resulted from failures to internalize systemic risk evenly across financial intermediaries and recognize the implications of Knightian uncertainty and mood swings. A successful reform of prudential regulation will need to integrate more harmoniously the three paradigms of moral hazard, externalities, and uncertainty. This is a tall order because each paradigm leads to different and often inconsistent regulatory implications. Moreover, efforts to address the central problem under one paradigm can make the problems under the others worse. To avoid regulatory arbitrage and ensure that externalities are uniformly internalized, all prudentially regulated intermediaries should be subjected to the same capital adequacy requirements, and unregulated intermediaries should be financed only by regulated intermediaries. Reflecting the importance of uncertainty, the new regulatory architecture will also need to rely less on markets and more on "holistic" supervision, and incorporate countercyclical norms that can be adjusted in light of changing circumstances. 2012-03-19T19:10:18Z 2012-03-19T19:10:18Z 2009-02-01 http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090504085341 http://hdl.handle.net/10986/4118 English Policy Research working paper ; no. WPS 4842,Proceedings CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank Publications & Research :: Policy Research Working Paper Latin America & Caribbean Latin America & Caribbean |