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Brunnermeier article

8 important questions on Brunnermeier article

Define the two views on regulations for micro-prudential purposes:

- the wider range of intermediaries should still be subject to individual micro-prudential regulation
- if an institution is not itself ''systemic'' there are not ehoretical grounds for external interference in its own chosen risk profile

What are the 3 main principles than Brunnermeier et al invokes:

- main objective of counter-cyclical regulation should be to reduce the systemic risk that fluctuations in the conditions of an institution would have on the rest of the system
- the measures have to be counter-cyclical
- to ensure strict adherence and implementation of such rules it is important to put an incentive structure for regulators in place

Counter-cyclical regulation should be most constraining during the height of a bubble. which risk-management approach should be favored according to brunnermeier?

lean against the wind, should be primarily done by counter-cyclical regulation

There are two measures that are being used when developing a regulatory approach to liquidity, which may make systemic liquidity events less frequent, name them:

Mark-to-funding accounting rule and explicit capital charge for liquidity risk

The main source of instability during the crisis has been short-term funding of long-term assets. what was another major problem according to brunnermeier?

regulators were focused on the quality of the assets and not so much about the systemic risk. since banks do not distinguish between the way assets are funded, they are left with an incentive to fund their assets with short-term as this is cheaper

Describe the reason why Credit rating agencies have lost much of reputation in the crisis

This is a result of giving high initial ratings to securitized mortgage-backed securities that after teh event appear to have been wrong.

Two considerations that limit the application of regulation on an international level:

- asset price cycles and the pace of credit expansion differs between countries
- crisis management is often very expensive and that the main source of such funding clearly has to be national treasuries

Give the 3 main functions of financial stability forum (FSF)

- crisis prevention
- crisis warning
- crisis management

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Brunnermeier article

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Brunnermeier article

8 important questions on Brunnermeier article

Define the two views on regulations for micro-prudential purposes:

What are the 3 main principles than Brunnermeier et al invokes:

Counter-cyclical regulation should be most constraining during the height of a bubble. which risk-management approach should be favored according to brunnermeier?

There are two measures that are being used when developing a regulatory approach to liquidity, which may make systemic liquidity events less frequent, name them:

The main source of instability during the crisis has been short-term funding of long-term assets. what was another major problem according to brunnermeier?

Describe the reason why Credit rating agencies have lost much of reputation in the crisis

Two considerations that limit the application of regulation on an international level:

Give the 3 main functions of financial stability forum (FSF)

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