Arbeitspapier

Regulating the Financial Cycle: An Integrated Approach with a Leverage Ratio

We propose a regulatory approach for restricting debt financing as an amplification mechanism across the financial system. A small stylised model illustrates the trade-off between static and time varying limits on leverage in dampening the financial cycle. The policy section proposes its application to highly leveraged entities and activities across the financial system. Whereas the traditional view on regulation focuses on capital as a buffer against exogenous risks, our approach focuses instead on debt financing, endogenous feedback mechanisms and resource allocation. It explicitly addresses the boundary problem in entity-based financial regulation and provides a motivation for substantially lower levels of leverage – and thereby higher capital buffers – than in the traditional approach.

Sprache
Englisch

Erschienen in
Series: Tinbergen Institute Discussion Paper ; No. 15-057/IV/DSF93

Klassifikation
Wirtschaft
Central Banks and Their Policies
General Financial Markets: General (includes Measurement and Data)
General Financial Markets: Government Policy and Regulation
Financial Institutions and Services: General
Thema
Financial cycle
macroprudential regulation
financial supervision
(shadow) banking

Ereignis
Geistige Schöpfung
(wer)
Schoenmaker, Dirk
Wierts, Peter
Ereignis
Veröffentlichung
(wer)
Tinbergen Institute
(wo)
Amsterdam and Rotterdam
(wann)
2015

Handle
Letzte Aktualisierung
10.03.2025, 11:45 MEZ

Datenpartner

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Objekttyp

  • Arbeitspapier

Beteiligte

  • Schoenmaker, Dirk
  • Wierts, Peter
  • Tinbergen Institute

Entstanden

  • 2015

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