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Prudential Discipline for Financial Firms: Micro, Macro, and Market Structures

dc.contributor.authorLarry D. Wall
dc.date.accessioned2015-04-10T10:16:48Z
dc.date.available2015-04-10T10:16:48Z
dc.date.issued2009-12-15
dc.identifier.urihttp://hdl.handle.net/11540/3764
dc.description.abstractThe recent global financial crisis reflects numerous breakdowns in the prudential discipline of financial firms. This paper discusses ways to strengthen micro- and macroprudential supervision and restore credible market discipline. The discussion notes that microprudential supervisors are typically assigned a variety of goals that sometimes have conflicting policy implications. In such a setting, the structure of the regulatory agencies and the priority given to prudential goals are critical to achieving those goals. The analysis of macroprudential supervision emphasizes that this supervisor must be both bold and modest: bold in seeking to understand the sources and distributions of systemically important risks, and modest about what a supervisor can do without imposing overly restrictive regulations. Finally, the paper argues that the primary responsibility for risk management must rest with firms, not with government supervisors. Unfortunately, systemic risk concerns have led governments to shield the private sector from the full losses that dull their incentive to discipline risk taking. This section of the paper suggests that deposit insurance reform, special resolutions for systemically important firms, and requiring firms to plan for their own resolution and contingent capital may all have a role to play in restoring effective market discipline.
dc.languageEnglish
dc.publisherAsian Development Bank
dc.rightsCC BY 3.0 IGO
dc.rights.urihttp://creativecommons.org/licenses/by/3.0/igo
dc.titlePrudential Discipline for Financial Firms: Micro, Macro, and Market Structures
dc.typeWorking Papers
dc.subject.expertMacroeconomic
dc.subject.expertMacroeconomic Analysis
dc.subject.expertPerformance Evaluation
dc.subject.expertImpact Evaluation
dc.subject.adbEconomic indicators
dc.subject.adbGrowth models
dc.subject.adbGross domestic product
dc.subject.adbMacroeconomics
dc.subject.adbEconomic forecast
dc.subject.naturalExports
dc.subject.naturalEconomic development projects
dc.subject.naturalEconomic policy
dc.subject.naturalEconomic forecasting
dc.title.seriesADBI Working Paper Series
dc.title.volume176
dc.contributor.imprintAsian Development Bank
oar.themeEconomics
oar.themeEvaluation
oar.adminregionAsia and the Pacific Region
oar.countryBangladesh
oar.countryBhutan
oar.countryIndia
oar.countryMaldives
oar.countryNepal
oar.countrySri Lanka
oar.countryBrunei Darussalam
oar.countryCambodia
oar.countryIndonesia
oar.countryLao People's Democratic
oar.countryMalaysia
oar.countryMyanmar
oar.countryPhilippines
oar.countrySingapore
oar.countryThailand
oar.countryViet Nam
oar.countryCook Islands
oar.countryFiji Islands
oar.countryKiribati
oar.countryMarshall Islands
oar.countryFederated States of Micronesia
oar.countryNauru
oar.countryPalau
oar.countryPapua New Guinea
oar.countrySamoa
oar.countrySolomon Islands
oar.countryTimor-Leste
oar.countryTonga
oar.countryTuvalu
oar.countryVanuatu
oar.countryAfghanistan
oar.countryArmenia
oar.countryAzerbaijan
oar.countryGeorgia
oar.countryKazakhstan
oar.countryKyrgyz Republic
oar.countryPakistan
oar.countryTajikistan
oar.countryTurkmenistan
oar.countryUzbekistan
oar.countryPeople's Republic of China
oar.countryHong Kong
oar.countryChina
oar.countryRepublic of Korea
oar.countryMongolia
oar.countryTaipei,China
oar.identifierOAR-004213
oar.authorWall, Larry D.
oar.importtrue
oar.googlescholar.linkpresenttrue


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    The Asian Development Bank Institute (ADBI) Working Paper series is a continuation of the formerly named Discussion Paper series which began in January 2003. The numbering of the papers continued without interruption or change. ADBI was established in 1997 in Tokyo, Japan, to help build capacity, skills, and knowledge related to poverty reduction and other areas that support long-term growth and competitiveness in developing economies in Asia and the Pacific.

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