2016/02/10 by Sebastian Poledna, Poledna, Sebastian, Olaf Bochmann +3
Economics, Econometrics and Finance · #Banking stability, regulation, efficiency #Complex Systems and Time Series Analysis #Credit Risk and Financial Regulations #Economic theories and models #FOS: Economics and business #Risk Management (q-fin.RM)
paper · pdf · doi:10.48550/arxiv.1602.03505
openalex publication_date 2016/02/10 · openalex created_date 2021/02/01 · openalex updated_date 2026/07/28
In addition to constraining bilateral exposures of financial institutions,\nthere are essentially two options for future financial regulation of systemic\nrisk (SR): First, financial regulation could attempt to reduce the financial\nfragility of global or domestic systemically important financial institutions\n(G-SIBs or D-SIBs), as for instance proposed in Basel III. Second, future\nfinancial regulation could attempt strengthening the financial system as a\nwhole. This can be achieved by re-shaping the topology of financial networks.\nWe use an agent-based model (ABM) of a financial system and the real economy to\nstudy and compare the consequences of these two options. By conducting three\n"computer experiments" with the ABM we find that re-shaping financial networks\nis more effective and efficient than reducing leverage. Capital surcharges for\nG-SIBs can reduce SR, but must be larger than those specified in Basel III in\norder to have a measurable impact. This can cause a loss of efficiency. Basel\nIII capital surcharges for G-SIBs can have pro-cyclical side effects.\n