What is it about?
Various conclusions have been put forward to explain what triggered the recent Financial Crisis. This chapter aims to explain why the Basel Committee's liquidity requirements and present proposals aimed at addressing liquidity risks, still represent a very modest milestone in efforts aimed at addressing challenges in prudential regulation and supervision. Even though problems attributed to capital adequacy requirements are considered by many authorities to have triggered the recent Crisis, the chapter will highlight how runs on banks are triggered by liquidity crises and that liquidity risks cannot be isolated from systemic risks. In so doing, it will incorporate the roles assumed by information asymmetries and market based regulation –hence elaborate on how market based regulation could serve to address problems which trigger liquidity risks. Imperfect knowledge being a factor which is contributory to liquidity crises and bank runs, and market based regulation being essential in facilitating disclosure - since the Basel Committee's focus on banks and prudential supervision cannot on its own, address the challenges encountered in the present regulatory environment.
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Why is it important?
Furthermore, it will address measures and proposals which could serve as bases for future regulatory reforms - as well as criticisms and challenges still encountered by recent Basel Committee initiatives
Perspectives
En outre, il traitera des mesures et propositions qui pourraient servir de base à de futures réformes réglementaires - ainsi que les critiques et les défis encore rencontrés par la récente Bâle Initiatives des comités
Prof Marianne Ojo
Northwestern University
Read the Original
This page is a summary of: Preparing for Basel IV – Why Liquidity Risks Still Present a Challenge to Regulators in Prudential Supervision, SSRN Electronic Journal, Social Science Electronic Publishing,
DOI: 10.2139/ssrn.1729057.
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