Successfully Implementing Major Financial Stability Regulatory Reforms: The Risk Weighting Based Controversy (Basel v Dodd Frank) and the Role of National Supervisors.
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As well as a consideration of the role contributed by national supervisors in the successful
implementation and enforcement of standards, recommendations and regulations, the significance
of clear and unambiguous mandates in enhancing communication between micro prudential
supervisors (usually national financial supervisors and central banks) and macro prudential bodies
which are responsible for writing the laws that are enforced by micro prudential supervisors, will be
highlighted in this paper. This will incorporate a discussion on the advantages and disadvantages
inherent in clear, explicit mandates – such a discussion necessitating a distinction between financial
stability and monetary policy objectives.
Furthermore, the role of credit ratings and their significance in influencing investor choices and
judgments, will be considered as a means of highlighting how they contribute to the neglect of
risks, exposures attributed to certain financial instruments, and ultimately, systemic risks which de
stabilize the financial system.
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HG Finance