Regulatory Reform : Integrating Paradigms

de la Torre, Augusto; Ize, Alain

dc.creator	de la Torre, Augusto
dc.creator	Ize, Alain
dc.date	2012-03-19T19:10:18Z
dc.date	2012-03-19T19:10:18Z
dc.date	2009-02-01
dc.date.accessioned	2023-02-17T21:09:31Z
dc.date.available	2023-02-17T21:09:31Z
dc.identifier	http://www-wds.worldbank.org/external/default/main?menuPK=64187510&pagePK=64193027&piPK=64187937&theSitePK=523679&menuPK=64187510&searchMenuPK=64187283&siteName=WDS&entityID=000158349_20090504085341
dc.identifier	http://hdl.handle.net/10986/4118
dc.identifier.uri	http://localhost:8080/xmlui/handle/CUHPOERS/245155
dc.description	The Subprime crisis largely resulted from failures to internalize systemic risk evenly across financial intermediaries and recognize the implications of Knightian uncertainty and mood swings. A successful reform of prudential regulation will need to integrate more harmoniously the three paradigms of moral hazard, externalities, and uncertainty. This is a tall order because each paradigm leads to different and often inconsistent regulatory implications. Moreover, efforts to address the central problem under one paradigm can make the problems under the others worse. To avoid regulatory arbitrage and ensure that externalities are uniformly internalized, all prudentially regulated intermediaries should be subjected to the same capital adequacy requirements, and unregulated intermediaries should be financed only by regulated intermediaries. Reflecting the importance of uncertainty, the new regulatory architecture will also need to rely less on markets and more on "holistic" supervision, and incorporate countercyclical norms that can be adjusted in light of changing circumstances.
dc.language	English
dc.relation	Policy Research working paper ; no. WPS 4842,Proceedings
dc.rights	CC BY 3.0 IGO
dc.rights	http://creativecommons.org/licenses/by/3.0/igo/
dc.rights	World Bank
dc.subject	ACCOUNTABILITY
dc.subject	ACCOUNTING
dc.subject	ADVERSE SELECTION
dc.subject	AGENCY PROBLEM
dc.subject	AGENCY PROBLEMS
dc.subject	ARBITRAGE
dc.subject	ASSET MANAGERS
dc.subject	ASSET PRICE
dc.subject	ASSET PRICES
dc.subject	ASYMMETRIC INFORMATION
dc.subject	BAILOUTS
dc.subject	BALANCE SHEET
dc.subject	BALANCE SHEETS
dc.subject	BANK EARNINGS
dc.subject	BANK FAILURE
dc.subject	BANK FAILURE RESOLUTION
dc.subject	BANKING SECTOR
dc.subject	BANKING SYSTEM
dc.subject	BID
dc.subject	BORROWER
dc.subject	BROKERAGE
dc.subject	BROKERAGE ACTIVITIES
dc.subject	BROKERS
dc.subject	BUSINESS CYCLE
dc.subject	BUSINESS OPPORTUNITIES
dc.subject	CAPITAL ADEQUACY
dc.subject	CAPITAL FLOWS
dc.subject	CAPITAL MARKET
dc.subject	CAPITAL MARKETS
dc.subject	CAPITAL RATIOS
dc.subject	CAPITAL REQUIREMENTS
dc.subject	CENTRAL BANK
dc.subject	CENTRAL BANKS
dc.subject	CHANNEL OF FINANCE
dc.subject	COLLECTIVE ACTION
dc.subject	COMMERCIAL BANKING
dc.subject	COMMERCIAL BANKS
dc.subject	CONSOLIDATED SUPERVISION
dc.subject	CONSUMER PROTECTION
dc.subject	CONTRACT ENFORCEMENT
dc.subject	COORDINATION FAILURE
dc.subject	COORDINATION FAILURES
dc.subject	CREDIT CHAIN
dc.subject	CREDIT DEFAULT
dc.subject	CREDIT DEFAULT SWAPS
dc.subject	CREDIT DERIVATIVES
dc.subject	CREDIT ENHANCEMENTS
dc.subject	CREDIT LINES
dc.subject	CREDIT MARKET
dc.subject	CREDIT RISK
dc.subject	CREDIT RISK EXPOSURES
dc.subject	CREDITWORTHY BORROWERS
dc.subject	DEBT
dc.subject	DEBT CONTRACTS
dc.subject	DEPOSIT
dc.subject	DEPOSIT INSURANCE
dc.subject	DEPOSIT RATES
dc.subject	DEPOSITOR
dc.subject	DEPOSITORS
dc.subject	DEPOSITS
dc.subject	DEREGULATION
dc.subject	DERIVATIVE
dc.subject	DERIVATIVE CONTRACTS
dc.subject	DERIVATIVE MARKETS
dc.subject	ECONOMIC CONDITIONS
dc.subject	EFFECTIVE GOVERNANCE
dc.subject	EQUITY INVESTMENTS
dc.subject	EQUITY SWAPS
dc.subject	EXCHANGE RATE
dc.subject	EXPOSURE
dc.subject	EXTENSION OF CREDIT
dc.subject	EXTERNALITIES
dc.subject	FAIR VALUE
dc.subject	FEDERAL RESERVE
dc.subject	FEDERAL RESERVE SYSTEM
dc.subject	FINANCIAL CONGLOMERATES
dc.subject	FINANCIAL CONTRACTS
dc.subject	FINANCIAL CRISES
dc.subject	FINANCIAL CRISIS
dc.subject	FINANCIAL DEEPENING
dc.subject	FINANCIAL DEVELOPMENT
dc.subject	FINANCIAL DEVELOPMENTS
dc.subject	FINANCIAL DISTRESS
dc.subject	FINANCIAL FLOWS
dc.subject	FINANCIAL INNOVATION
dc.subject	FINANCIAL INSTITUTIONS
dc.subject	FINANCIAL INTERMEDIARIES
dc.subject	FINANCIAL MANAGEMENT
dc.subject	FINANCIAL MARKET
dc.subject	FINANCIAL MARKET PARTICIPANTS
dc.subject	FINANCIAL MARKETS
dc.subject	FINANCIAL REGULATION
dc.subject	FINANCIAL SECTOR
dc.subject	FINANCIAL STABILITY
dc.subject	FINANCIAL SYSTEM
dc.subject	FINANCIAL SYSTEMS
dc.subject	FRAUD
dc.subject	GOVERNANCE ISSUES
dc.subject	GOVERNANCE STANDARDS
dc.subject	GOVERNMENT INTERVENTION
dc.subject	HEDGE FUNDS
dc.subject	HOLDING
dc.subject	HOUSING
dc.subject	HOUSING FINANCE
dc.subject	HOUSING PRICES
dc.subject	INFLATION
dc.subject	INFORMATION ASYMMETRY
dc.subject	INFORMED INVESTORS
dc.subject	INSTRUMENT
dc.subject	INSURANCE
dc.subject	INSURANCE COMPANIES
dc.subject	INTEREST RATE
dc.subject	INTEREST RATES
dc.subject	INTERNATIONAL BANK
dc.subject	INTERNATIONAL ECONOMICS
dc.subject	INVESTING
dc.subject	INVESTMENT BANKING
dc.subject	INVESTMENT BANKS
dc.subject	INVESTMENT OPPORTUNITIES
dc.subject	INVESTMENT VEHICLES
dc.subject	INVESTOR PROTECTION
dc.subject	LEGISLATION
dc.subject	LENDER-OF-LAST-RESORT
dc.subject	LENDERS
dc.subject	LEVY
dc.subject	LIMITED LIABILITY
dc.subject	LIQUID ASSETS
dc.subject	LIQUID SECONDARY MARKETS
dc.subject	LIQUIDITY
dc.subject	LIQUIDITY CRISES
dc.subject	LIQUIDITY FACILITIES
dc.subject	LIQUIDITY RISK
dc.subject	LOAN
dc.subject	MALFEASANCE
dc.subject	MANDATES
dc.subject	MARKET DEVELOPMENT
dc.subject	MARKET DISCIPLINE
dc.subject	MARKET FAILURE
dc.subject	MARKET FAILURES
dc.subject	MARKET LIQUIDITY
dc.subject	MARKET PARTICIPANTS
dc.subject	MARKET PLAYERS
dc.subject	MARKET RISKS
dc.subject	MARKET VALUES
dc.subject	MARKET-MAKING
dc.subject	MATURITY
dc.subject	MATURITY GAP
dc.subject	MATURITY MISMATCHES
dc.subject	MATURITY STRUCTURE
dc.subject	MONETARY AUTHORITIES
dc.subject	MONETARY POLICY
dc.subject	MORAL HAZARD
dc.subject	MORTGAGE
dc.subject	MORTGAGE LENDING
dc.subject	MORTGAGE-BACKED SECURITIES
dc.subject	MORTGAGES
dc.subject	MUTUAL FUNDS
dc.subject	NEW MARKETS
dc.subject	OPPORTUNISTIC BEHAVIOR
dc.subject	OVERNIGHT REPOS
dc.subject	PENSION
dc.subject	PENSION FUNDS
dc.subject	POLICY RESPONSES
dc.subject	PORTFOLIO
dc.subject	PORTFOLIOS
dc.subject	PRICE RISK
dc.subject	PRICE VOLATILITY
dc.subject	PRINCIPAL-AGENT PROBLEM
dc.subject	PRINCIPAL-AGENT PROBLEMS
dc.subject	PRUDENTIAL REGULATION
dc.subject	PRUDENTIAL REGULATIONS
dc.subject	PRUDENTIAL REQUIREMENTS
dc.subject	PRUDENTIAL STANDARDS
dc.subject	PUBLIC FUNDS
dc.subject	PUBLIC LENDER
dc.subject	PUBLIC POLICY
dc.subject	RATING AGENCIES
dc.subject	REAL SECTOR
dc.subject	REGULATOR
dc.subject	REGULATORS
dc.subject	REGULATORY FORBEARANCE
dc.subject	REGULATORY FRAMEWORK
dc.subject	REGULATORY REQUIREMENTS
dc.subject	REPAYMENT
dc.subject	REPAYMENTS
dc.subject	REPUTATION
dc.subject	RETURNS
dc.subject	RISK AVERSION
dc.subject	RISK MANAGEMENT
dc.subject	RISK MANAGERS
dc.subject	RISK PREMIUM
dc.subject	RISK TAKING
dc.subject	RISK WEIGHT
dc.subject	RISK WEIGHTS
dc.subject	RISKY ASSETS
dc.subject	SAFETY NET
dc.subject	SALE OF MORTGAGE
dc.subject	SAVINGS
dc.subject	SECURITIES
dc.subject	SECURITIES MARKET
dc.subject	SECURITIES MARKETS
dc.subject	SHAREHOLDERS
dc.subject	SHORT-TERM LIABILITIES
dc.subject	SMALL BORROWER
dc.subject	SOCIAL COST
dc.subject	SOCIAL COSTS
dc.subject	SOCIAL RISKS
dc.subject	STOCK MARKET
dc.subject	STOCK MARKET PRICE
dc.subject	STOCK PRICES
dc.subject	STOCK TRADING
dc.subject	STOCKS
dc.subject	SWAP
dc.subject	SYSTEMIC RISK
dc.subject	SYSTEMIC RISKS
dc.subject	TRADING
dc.subject	TRADITIONAL BANKING
dc.subject	TRANCHES
dc.subject	TRANSACTION
dc.subject	TRANSACTION COSTS
dc.subject	TRANSPARENCY
dc.subject	TREASURY
dc.subject	UNDERLYING ASSET
dc.subject	UNIVERSAL BANKING
dc.subject	VALUATIONS
dc.subject	WHOLESALE FINANCE
dc.subject	WHOLESALE INVESTORS
dc.title	Regulatory Reform : Integrating Paradigms
dc.type	Publications & Research :: Policy Research Working Paper
dc.coverage	Latin America & Caribbean
dc.coverage	Latin America & Caribbean