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The financial crisis that began in 2007 in the United States swept the world, producing substantial bank failures and forcing unprecedented state aid for the crippled global financial system. Bringing together three leading financial economists to provide an international perspective,Balancing the Banksdraws critical lessons from the causes of the crisis and proposes important regulatory reforms, including sound guidelines for the ways in which distressed banks might be dealt with in the future. While some recent policy moves go in the right direction, others, the book argues, are not sufficient to prevent another crisis. The authors show the necessity of anadaptiveprudential regulatory system that can better address financial innovation. Stressing the numerous and complex challenges faced by politicians, finance professionals, and regulators, and calling for reinforced international coordination (for example, in the treatment of distressed banks), the authors put forth a number of principles to deal with issues regarding the economic incentives of financial institutions, the impact of economic shocks, and the role of political constraints. Offering a global perspective,Balancing the Banksshould be read by anyone concerned with solving the current crisis and preventing another such calamity in the future.

The Basel Committee on Banking Supervision (BCBS) sets the guidelines for world-wide regulation of banks. It is the forum for agreeing international regulation on the conduct of banking. Based on special access to the archives of the BCBS and interviews with many of its key players, this book tells the story of the early years of the Committee from its foundation in 1974/5 right through until 1997 - the year that marks the watershed between the Basel I Accord on Capital Adequacy and the start of work on Basel II. In addition, the book covers the Concordat, the Market Risk Amendment, the Core Principles of Banking and all other facets of the work of the BCBS. While the book is primarily a record of the history of the BCBS, it also provides an assessment of its actions and efficacy. It is a major contribution to the historical record on banking supervision.

Presents information sources and methodologies for modeling and simulating banking system stability Combining both academic and institutional knowledge and experience, Banking Systems Simulation: Theory, Practice, and Application of Modeling Shocks, Losses, and Contagion presents banking system risk modeling clearly within a theoretical framework. Written from the global financial perspective, the book explores single bank risk, common bank exposures, and contagion, and how these apply on a systemic level. Zedda approaches these simulation methods logically by providing the basic building blocks of modeling and simulation, and then delving further into the individual techniques that make up a systems model. In addition, the author provides clear and detailed explanations of the foundational research into the mathematical and legal concepts used to analyze banking risk problems, measures and data for representing the main banking risk sources, and the major problems researchers are likely to encounter. There are numerous software descriptions throughout, with references and tools to help readers gain a proper understanding of the presented techniques and possibly develop new applications and research. The book concludes with an appendix that features real-world datasets and models. In addition, this book: - Provides a comprehensive overview of methods for analyzing models and simulating risk for banking and financial systems - Provides a clear presentation of the technical and legal concepts used in banking regulation - Presents unique insights from an expert's perspective, with specific coverage of assessing risks and developing what-if analyses at the systems level - Concludes with a discussion of applications, including banking systems regulation what-if tests, cost-benefit analysis, evaluations of banking systems stability effects on public finances, dimensioning, and risk-based contributions for Deposit Guarantee Schemes (DGS) and Resolution Funds Banking Systems Simulation: Theory, Practice, and Application of Modeling Shocks, Losses, and Contagion is ideal for banking researchers focusing on computational methods of analysis as well as an appropriate reference for graduate-level students in banking, finance, and computational methods. Stefano Zedda is Researcher in Financial Mathematics at the University of Cagliari in Italy and qualified as associate professor in banking and corporate finance. His research is mainly focused on quantitative analyses for banking and finance, with a particular focus on banking systems modeling and simulation. In 2008, Zedda developed the mathematical modeling and software implementation of the Systemic Model for Banking Originated Losses (SYMBOL), further developed during his activity at the European Commission. The Commission subsequently adopted it as a standard tool for testing banking regulation proposals. Stefano Zedda's research interests include banking, financial mathematics, and statistics, specifically simulation of banking and financial systems stability, banking regulation impact assessment, and interactive agent simulation.

By incorporating both the fire sales contagion mechanism and the bankruptcy contagion mechanism into a bank network model, this paper examines how risks are generated under dynamic shocks. In particular, this paper constructs systemic risk indicators suitable for analyzing multiple rounds of contagion under different shocks (time dimension) and from institutions and assets (spatial dimension). Indicators that measure the indirect relevance between institutions and between assets are also innovatively built. It is found that due to deleveraging or bankruptcy among a large number of banks, the systemic risk exhibits an upward trend marked by intermittent jumps under varying intensities of shocks. Risks are generated mainly through the fire sales contagion mechanism of deleveraging under small shocks, and through the bankruptcy contagion mechanism under large shocks. In terms of influencing factors, a stronger indirect relevance, a lower leverage skewness and a higher leverage level in the banking system lead to higher risks. In particular, the influence of leverage skewness on systemic risk is stronger than that of leverage level.

Following the Great Financial Crisis, European Union (EU) rules in the area of banking supervision have become ever more strongly influenced by the (formally non-binding) standards developed by international financial fora, chief of which are the G20 and the Basel Committee on Banking Supervision. European representation in these fora fluctuates, as varying, though, reduced groups of individual Member States are involved directly alongside EU institutions and bodies. Taking the example of the Basel Accords, this article sets forth to examine how the European participation in those fora is articulated, whilst also assessing the existing mechanisms of democratic accountability. Indeed, in view of the important constraints these standards impose on European legislators, it is of utmost importance that they be involved early on when they are defined to avoid any democratic accountability gap from arising.