Regulators of financial institutions in most parts of the globe are making impressive achievement in terms of regulating the behavior of banks on the level of risk they can take in making investment decisions. Professionals in the finance industry have made a huge impact in trying to regulate...

The global financial crisis underlined that sound and effective bank regulation is vital to financial stability. Assessments of the global financial crisis invariably point to ineffective finance regulation and supervision as the main reasons for the onset of the crisis and its severity. In...

This paper introduces a new comprehensive data set on policies of a macroprudential nature in the banking sectors of the 28 member states of the European Union (EU) between 1995 and 2014. The Macroprudential Policies Evaluation Database (MaPPED) offers a detailed overview of the "life-cycle" of...

We investigate the risk taking incentives of "stressed banks" - the banks that are subject to annual regulatory stress tests in the U.S. since 2011. We document that stress tests effectively encourage prudent investment from stressed banks through regulatory monitoring, but also provide them...

In the aftermath of bank proprietary trading losses in the 2007–09 crisis, the Basel framework uses stressed Conditional Value-at-Risk to set minimum capital requirements for proprietary trading portfolios, whereas the Volcker rule restricts their composition in the US. With or without this...

The standard macroprudential models focus on externalities and treat all prudential instruments as alternative, but equivalent, forms of Pigouvian taxes. This paper explicitly models individual banks’ risk choices and shows that different prudential instruments affect banks’ risk-taking...

The use of contractual engineering to create channels of credit intermediation outside of the realm of banking regulation has been a recurring activity in Western financial systems over the last 50 years. After the financial crisis of 2007 and 2008, this phenomenon, at that time commonly...

The emergence of so-called "decentralised finance" (DeFi) and a shadow financial system of cryptocurrency exchanges and stablecoin issuers raises the challenge of how to apply technology-neutral regulation so that similar risks are subject to the same rules. This paper makes the case for...

This paper examines banks' disclosures and loss recognition in the financial crisis and identifies several core issues for the link between accounting and financial stability. Our analysis suggests that, going into the financial crisis, banks' disclosures about relevant risk exposures were...

This paper examines how microprudential policy affects income inequality, and whether and how the effect of macroprudential policy on income inequality depends on the stance of microprudential policy. The dataset covers 70 countries over the period 1996-2013. Applying the system GMM estimation...