eprintid: 14429
rev_number: 17
eprint_status: archive
userid: 5
dir: disk0/00/01/44/29
datestamp: 2017-03-06 09:39:51
lastmod: 2021-08-27 17:41:49
status_changed: 2017-03-06 09:39:51
type: article
metadata_visibility: show
item_issues_count: 0
creators_name: Poledna, S.
creators_name: Bochmann, O.
creators_name: Thurner, S.
creators_id: 2083
creators_id: 1918
title: 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
ispublished: pub
divisions: prog_asa
keywords: Basel III; Systemic Risk; Resilience; Agent-Based Modelling; Self-organisation; Network Optimisation; DebtRank; Banking regulation; Sustainability
abstract: 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.
date: 2017-04
date_type: published
publisher: Elsevier
id_number: 10.1016/j.jedc.2017.02.004
creators_browse_id: 235
creators_browse_id: 307
full_text_status: public
publication: Journal of Economic Dynamics and Control
volume: 77
pagerange: 230-246
refereed: TRUE
issn: 1879-1743
projects: Complexity Research Initiative for Systemic InstabilitieS (CRISIS, FP7 288501)
projects: multi-LAyer SpAtiotemporal Generalized NEtworks (LASAGNE, FP7 318132)
projects: Foundational Research on MULTIlevel comPLEX networks and systems (MULTIPLEX, FP7 317532)
coversheets_dirty: FALSE
fp7_project: yes
fp7_project_id: info:eu-repo/grantAgreement/EC/FP7/288501/EU//CRISIS; info:eu-repo/grantAgreement/EC/FP7/318132/EU//LASAGNE; info:eu-repo/grantAgreement/EC/FP7/317532/EU//MULTIPLEX
fp7_type: info:eu-repo/semantics/article
access_rights: info:eu-repo/semantics/embargoedAccess
citation:   Poledna, S. <https://pure.iiasa.ac.at/view/iiasa/235.html>, Bochmann, O., & Thurner, S. <https://pure.iiasa.ac.at/view/iiasa/307.html>  (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. 10.1016/j.jedc.2017.02.004 <https://doi.org/10.1016/j.jedc.2017.02.004>.       
document_url: https://pure.iiasa.ac.at/id/eprint/14429/1/Basel%20III%20capital%20surcharges%20.pdf