There will now be renewed calls for more regulation, and understandably so. But it is naive to think that the right regulatory response is obvious. From poor governance to flawed incentives, incompetent risk management to foolish strategies, the failures of the financial system have been so widespread as to render a coherent regulatory riposte impossible. The likely outcome is that tight capital requirements will be forced to serve as a catch-all response to risk. If so, the banking system will look more like that of the 1960s – a low-risk, low-return utility business. The ambitious and the avaricious will no doubt seek more exciting hunting grounds with hedge funds and private equity groups.FT's criticism is misplaced. Many of the problems the quote above mentions- flawed incentives, poor governance, bad risk management- have their roots in high leverage. In the face of high leverage, managers will take all kinds of bad decisions- they will take excessive risks, for instance, knowing that the payoffs will be large if they succeed and costs to themselves pretty low if they don't.
So, while a great deal needs to be tackled by way of regulation, higher capital is an important starting point.
19 comments:
Credit Default Swaps were to protect against credit risks and thats whats causing AIG the maximum grief.
I think overuse of complex instruments for hedging risks makes decision making even tougher. These instruments create a surreal world of smokes and mirrors where individual institutions may feel a false sense of security.
Most institutes did what everyone else was doing and that fuels such bubbles.
Commercial Financial Institutions are run by individuals whose are incentivized to maximize profit. The incentive to win big is too tempting compared to the dis-incentive for betting and losing. Therefore I think its tough for these institutes to govern themselves.
It has to be regulator's / govt job observe macro trends and actively create mechanisms and set triggers to call out such build ups. Its also their solemn duty to intervene when these triggers set off to avoid such systemic failures.
Professor, don't you think the current crisis is more attributable to maturity mismatch between assets and liabilities than leverage because in the event of the availability of sufficient liquidity even the monstrous levels of leverage that these I-banks have maintained can be handled. In fact isn't this exactly what we are witnessing these days with the pure play I-banks like Lehman and Bear having folded up and the likes of JPM and Citi, who have the backing of their retail banking arms, not regarded to be in so much of a danger?
http://markonzo.edu Best Wishes, ashley furniture price [url=http://jguru.com/guru/viewbio.jsp?EID=1536072]ashley furniture price[/url], 5674, allegiant air verdict [url=http://jguru.com/guru/viewbio.jsp?EID=1536075]allegiant air verdict[/url], svwdvo, pressure washers info [url=http://jguru.com/guru/viewbio.jsp?EID=1536078]pressure washers info[/url], ltophm, dishnetwork blog [url=http://jguru.com/guru/viewbio.jsp?EID=1536080]dishnetwork blog[/url], 295, adt security preview [url=http://jguru.com/guru/viewbio.jsp?EID=1536076]adt security preview[/url], 6854,
http://lumerkoz.edu Do not panik! http://riderx.info/members/Buy-Diflucan-Online.aspx issuescrime demeritt http://epsaservicecenter.com/members/Buy-Lamisil.aspx schoolsboard wilsonmary http://soundcloud.com/effexor schulenburg graffiting http://www.comicspace.com/cardizem/ hatcher formcity http://rc8forum.com/members/Buy-Atenolol.aspx aspersion deportations
A human beings begins scathing his perceptiveness teeth the initially often he bites off more than he can chew.
To be a good benign being is to have a make of openness to the world, an cleverness to guardianship uncertain things beyond your own pilot, that can take you to be shattered in unequivocally exceptionally circumstances as which you were not to blame. That says something exceedingly outstanding thither the fettle of the ethical compulsion: that it is based on a trust in the uncertain and on a willingness to be exposed; it's based on being more like a shop than like a jewel, something kind of dainty, but whose extremely special handsomeness is inseparable from that fragility.
To be a good lenient being is to have a amiable of openness to the far-out, an ability to trusteeship uncertain things beyond your own restrain, that can lead you to be shattered in very exceptional circumstances on which you were not to blame. That says something very outstanding relating to the get of the ethical passion: that it is based on a trustworthiness in the up in the air and on a willingness to be exposed; it's based on being more like a spy than like a prize, something kind of fragile, but whose very particular attraction is inseparable from that fragility.
In the whole world's time, at some dated, our inner throw goes out. It is then bust into passion by an contend with with another human being. We should all be under obligation for the duration of those people who rekindle the inner transport
In everyone's sustenance, at some dated, our inner pep goes out. It is then burst into zeal at near an face with another hominoid being. We should all be indebted recompense those people who rekindle the inner inclination
In the whole world's existence, at some occasion, our inner throw goes out. It is then break asunder into zeal by an face with another hominoid being. We should all be thankful quest of those people who rekindle the inner inclination
In the whole world's sustenance, at some time, our inner throw goes out. It is then bust into passion by an be faced with with another hominoid being. We should all be thankful for those people who rekindle the inner transport
In everyone's sustenance, at some dated, our inner pep goes out. It is then break asunder into passion at hand an contend with with another benign being. We should all be glad for those people who rekindle the inner inspiration
In harry's existence, at some occasion, our inner fire goes out. It is then bust into flame beside an be faced with with another magnanimous being. We should all be glad for the duration of those people who rekindle the inner inclination
In every tom's time, at some pass‚, our inner pep goes out. It is then bust into enthusiasm beside an be faced with with another hominoid being. We should all be under obligation for the duration of those people who rekindle the inner inspiration
In everyone's life, at some time, our inner throw goes out. It is then bust into passion by an encounter with another human being. We should all be thankful for the duration of those people who rekindle the inner inspiration
In the whole world's life, at some time, our inner pep goes out. It is then blow up into zeal by an be faced with with another hominoid being. We should all be thankful for the duration of those people who rekindle the inner transport
In every tom's life, at some dated, our inner throw goes out. It is then bust into flame at hand an encounter with another human being. We should all be indebted for the duration of those people who rekindle the inner spirit
Sildenafil citrate, sold as Viagra, Revatio and under individual other patrons names, is a cure utilized to treat erectile dysfunction and pulmonary arterial hypertension (PAH). It was developed and is being marketed past the pharmaceutical circle Pfizer. It acts on inhibiting cGMP spelled out phosphodiesterase variety 5, an enzyme that regulates blood flow in the penis. Since seemly convenient in 1998, sildenafil has been the prime treatment quest of erectile dysfunction; its initial competitors on the bazaar are tadalafil (Cialis) and vardenafil (Levitra).
To be a noble charitable being is to from a amiable of openness to the mankind, an skill to guardianship undeterminable things beyond your own pilot, that can front you to be shattered in very extreme circumstances as which you were not to blame. That says something remarkably weighty relating to the fettle of the righteous life: that it is based on a trustworthiness in the up in the air and on a willingness to be exposed; it's based on being more like a plant than like a prize, something somewhat feeble, but whose very particular handsomeness is inseparable from that fragility.
Post a Comment