RT Journal Article
SR 00
ID 10.1016/j.jedc.2017.02.004
A1 Poledna, S.
A1 Bochmann, O.
A1 Thurner, S.
T1 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
JF Journal of Economic Dynamics and Control
YR 2017
FD 2017-04
VO 77
SP 230
OP 246
K1 Basel III; Systemic Risk; Resilience; Agent-Based Modelling; Self-organisation; Network Optimisation; DebtRank; Banking regulation; Sustainability
AB 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.
PB Elsevier
SN 1879-1743
LK https://pure.iiasa.ac.at/id/eprint/14429/