In the wake of the financial crisis, new regulatory measures were introduced which, along with changes in monetary and macroeconomic policy, have transformed the global financial structure. However, this new financial structure displays various fragilities. A new shadow banking system has grown both inside and outside the traditional banks and the divergence between core and periphery countries’ banks has increased further due to both the new regulations and the European Central Bank’s very peculiar interventions.
Following Minsky’s approach, this volume explores the interplay between monetary policy, regulation and institutions in the aftermath of the great financial crisis. Minsky’s insights are used to interpret the recent regulatory changes and consider how they have affected the evolution of banks and financial markets. The unfortunate conclusion is that the changes in financial regulation introduced in various jurisdictions and inspired by the work of the Basel Committee, have not succeeded in thwarting the instability of the economic system. Instead, the mix of policies implemented so far has brought about increased fragility in the financial system. Minksy’s work on financial stability offers alternative solutions which policy-makers need to consider to resolve these issues.
Financial Regulation in the European Union After the Crisis is an important volume for those who study political economy, banking and monetary economics.
Table of Contents
Minsky’s institutional analysis of the development of the economy and how financial regulation fits in it.
System’s endogeneous dynamics versus institutions and interventions.
Financial innovation as bricolage.
Minsky on money manager capitalism, finance and thwarting systems.
Recent proposals of change in financial regulation inspired by Minsky.
Is the central bank the only circuit breaker left ?
Basel III: the revised capital requirements, the leverage ratio, and total loss absorbing capacity.
The revised capital requirements. Just a change in the weights?
How the revision in capital requirements should work in practice.
Other macroprudential measures.
The Leverage Ratio
The definition of leverage ratio and how to calculate it.
Too much hope in this new tool?
Total loss absorbing capacity in the EU.
Two additional regulatory metrics: the Liquidity Coverage Ratio and the Net Stable Funding Ratio.
The Liquidity Coverage Ratio.
How to calculate the numerator of the ratio.
How to calculate the denominator of the ratio.
Conclusions about the theoretical underpinnings of the ratio.
Eba’s studies on the application of the BCBS designed liquidity coverage ratio to the European Union banking system.
The Net Stable Funding Ratio.
How to calculate the net stable funding ratio.
The treatment of derivatives in the NSFR and the discussion with industry representatives.
What type of banking does the NSFR favor?
Main consequences of the interaction between new regulatory rules (risk weighted capital requirements, lev
Domenica Tropeano is Associate Professor at the Department of Economics, Università di Macerata, Italy.