Perhaps the best way to manage the financial sector’s systemic risk is to put a brake on its carriers and require all products over a certain volume to be traded on an exchange rather than over the counter or, at a minimum, to create a mandatory central clearing house for them. This approach would make products simpler, more standardized, and more transparent, reducing the latent liquidity and counterparty risks that come to the fore in financial crises.Please sign in to print or download this article.
It is not clear whether governments coping with the present were right to rescue and continue to support so many banks. But incentives matter: no matter how big banks are regulated, there will be many more failures if they always expect to be bailed out.Our flagship business publication has been defining and informing the senior-management agenda since 1964.
Systemic risk threats are defined in the Dodd Frank Section 203(b)(1), Systemic Risk Determination, and Sec. 203(c)(4) as one of four factors for “”
For bank holding companies violations of accounting can lead to severe penalties. 12 U.S.C. § 1847, Penalties states:Dodd Frank Stress Test Results for 2017, June 22, 2017.