Poledna S, Bochmann O, & Thurner S (2017). Basel III capital surcharges for G-SIBs are far less effective in managing systemic risk in comparison to network-based, systemic risk-dependent financial transaction taxes. Journal of Economic Dynamics and Control 77: 230-246. DOI:10.1016/j.jedc.2017.02.004.
Basel III capital surcharges for G-SIBs are far less effective in managing systemic risk in comparison to network-based, systemic risk-dependent financial transaction taxes.pdf - Accepted Version
Restricted to Repository staff only until 7 March 2019.
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In addition to constraining bilateral exposures of financial institutions, there exist essentially two options for future financial regulation of systemic risk: First, regulation could attempt to reduce the financial fragility of global or domestic systemically important financial institutions (G-SIBs or D-SIBs), as for instance proposed by Basel III. Second, it could focus on strengthening the financial system as a whole by reducing the probability of large-scale cascading events. This can be achieved by re-shaping the topology of financial networks. We use an agent-based model of a financial system and the real economy to study and compare the consequences of these two options. By conducting three computer experiments with the agent-based model we find that re-shaping financial networks is more effective and efficient than reducing financial fragility. Capital surcharges for G-SIBs could reduce systemic risk, but they would have to be substantially larger than those specified in the current Basel III proposal in order to have a measurable impact. This would cause a loss of efficiency.
|Uncontrolled Keywords:||Basel III; Systemic Risk; Resilience; Agent-Based Modelling; Self-organisation; Network Optimisation; DebtRank; Banking regulation; Sustainability|
|Research Programs:||Advanced Systems Analysis (ASA)|
|Depositing User:||Romeo Molina|
|Date Deposited:||06 Mar 2017 09:39|
|Last Modified:||27 Mar 2017 08:38|
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