ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

Articles by Avinash PersaudSubscribe to Avinash Persaud

A Different Approach to Financial Regulation

Prevention of future crises calls for not just more regulation per se, but better regulation - in particular, regulation with a greater macro-prudential orientation. Macro-prudential regulation concerns itself with the stability of the financial system as a whole. By contrast, micro-prudential regulation, consisting of such measures as the certification of those working in the financial sector and rules on how financial institutions operate, concerns itself with the stability of individual entities and the protection of individuals.

A Radical Proposal to Reform Governance of International Financial Institutions

The road to greater legitimacy for the International Monetary Fund and the World Bank does not lie merely through greater "democracy". Both the creditors and debtors of these international financial institutions need to have a greater say. A proposal to have two categories of shareholders, one of stakeholders and the other the creditors, the latter a group of countries that has hitherto not been given its due at the international financial institutions.

Do Not Be Distracted by Mr Madoff

Financial crashes do not occur randomly, but generally follow booms. Through a number of avenues, sometimes regulatory, sometimes not, though often in the name of risk-sensitivity, sophistication and modernity, the impact of current market prices on behaviour has increased. This increased use of market prices has increased the endogeneity of financial market risks. In the economic up-cycle, pricebased measures of asset values rise, price-based measures of risk fall and competition to grow bank profits increases. A critical component of the policy response to crisis should be for bank regulation to act as a countervailing force to the natural decline in measured risks in a boom and the subsequent rise in measured risks in the subsequent collapse.


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