Published on Tuesday, November 3, 2020
Global | Procyclical financial regulation: what can be done?
Summary
The Covid crisis has shown that the reform of international financial regulation in recent years has not corrected the procyclicality problem. On the contrary, this problem has worsened as a result of the new accounting standards. The article explores the reasons for this and possible policy measures to address the problem.
Key points
- Key points:
- Financial regulation remains procyclical.
- This is the result of policies that tend to be too lenient in the boom and markets tend to be too harsh in the bust.
- What we need is tighter policies in the good times and more forward-looking markets in the bad times.
- A rebalancing of the capital buffers, increasing the countercyclical buffer and reducing structural ones, would also allow for a better reaction to negative shocks.
- The relation between countercyclical capital buffers and dynamic provisions under expected loss accounting is an area that deserves further research.
Geographies
- Geography Tags
- Global
Topics
- Topic Tags
- Banks
- Financial Regulation
Documents and files
Santiago_Fernandez_de_Lis_Procyclical_financial_regulation_what_can_be_World_Economic_ForumWB.pdf
English - November 3, 2020
Authors
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