TY  - UNPD
A1  - Pagano, Marco
T1  - Lessons from the european financial crisis
T2  - Center for Financial Studies (Frankfurt am Main): CFS working paper series ; No. 486
N2  - his paper distils three lessons for bank regulation from the experience of the 2009-12 euro-area financial crisis. First, it highlights the key role that sovereign debt exposures of banks have played in the feedback loop between bank and fiscal distress, and inquires how the regulation of banks’ sovereign exposures in the euro area should be changed to mitigate this feedback loop in the future. Second, it explores the relationship between the forbearance of non-performing loans by European banks and the tendency of EU regulators to rescue rather than resolving distressed banks, and asks to what extent the new regulatory framework of the euro-area “banking union” can be expected to mitigate excessive forbearance and facilitate resolution of insolvent banks. Finally, the paper highlights that capital requirements based on the ratio of Tier-1 capital to banks’ risk-weighted assets were massively gamed by large banks, which engaged in various forms of regulatory arbitrage to minimize their capital charges while expanding leverage. This argues in favor of relying on a set of simpler and more robust indicators to determine banks’ capital shortfall, such as book and market leverage ratios.
T3  - CFS working paper series - 486 
KW  - bank regulation
KW  - euro
KW  - financial crisis
KW  - sovereign exposures
KW  - forbearance
KW  - bank resolution
KW  - bank capital requirements
Y1  - 2014
UR  - http://publikationen.ub.uni-frankfurt.de/frontdoor/index/index/docId/35309
UR  - https://nbn-resolving.org/urn:nbn:de:hebis:30:3-353097
UR  - http://ssrn.com/abstract=2517318
IS  - 8 September 2014
PB  - Center for Financial Studies
CY  - Frankfurt, M.
ER  -