In 2008, the G20 committed to fundamental reform of the global financial system to address the major fault lines that caused the crisis. Banks, particularly in the US originated a large volume of credits to low quality borrowers. Those credits were re-distributed widely to the whole financial system, through securitization. The opaqueness of the securitized market added to the stress and prevented regulators from pinpointing the risks. Against this background, the G20 countries committed to enlarge the scope of regulation to all players and markets, including credit rating agencies, derivatives and hedge funds. For the first time, no market and no market instrument would escape oversight. Banking regulation has been strengthened, with the Basel III package of reforms being its centrepiece. Full, timely and consistent implementation of Basel III is fundamental to a sound and properly functioning banking system that is able to support economic recovery and growth on a sustainable basis.The supervisory architecture has also been reshuffled with a Financial Stability Committee being set up.
This lecture aims at giving the students an overview of recent and future regulatory reforms, both on the bank and market sides.
I - Reforming the Regulatory and Supervisory Architecture [1.5 hours]
II - Building resilient financial institutions : The Basel III Package/ CRR-CRD-IV [6 hours]
III - Ending too-big-to-fail [6 hours]
IV - Making over-the-counter (OTC) derivatives markets safer [4.5 hours]
V - The new EU Security Legal Framework [3 hours]
BCBS (2011), Basel III: A global regulatory framework for more resilient banks and banking systems
Ben Bernanke, “Some Reflections on the Crisis and the Policy Response”
EBA (2015), Annual Report
FSB (2015), Annual Report
FSB (2014), Key Attributes of Effective Resolution Regimes for Financial Institutions
IMF (2012), From Bail-out to Bail-in: Mandatory Debt Restructuring of Systemic Financial Institutions
IMF (2016), Global Financial Stability Review
IMF, (2016), Article IV Euroarea
IMF, (2013), R. Goyal, P. Koeva Brooks, M. Pradhan, T. Tressel, G. Dell’Ariccia, R. Leckow, C. Pazarbasioglu, “A Banking Union for the Euro Area,” IMF Staff Discussion Note, February
Tarullo D., (2012), “Regulatory Reform since the Financial Crisis”
Vinãls, J.; Pazarbasioglu, C.; Surti, J.; Narain, A.; Erbenova, M.; Chow, J., (2013), “Creating a Safer Financial System: Will the Volcker, Vickers, and Liikanen Structural Measures Help?”
Group of students (3) will present a topic for 15 minutes. They will send their slides two days in advance (60% of the total mark).
Slides Presentation (50%), participation (25%), final exam (12%)