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Systemic banking crises: completing the enhanced policy responses

Olivier Frecaut (Lead Financial Sector Expert, Monetary and Capital Markets Department, International Monetary Fund)

Journal of Financial Regulation and Compliance

ISSN: 1358-1988

Article publication date: 13 November 2017

Abstract

Purpose

This paper aims to suggest ways to complete the enhancement of the policy responses to systemic banking crises that followed the Great Financial Crisis.

Design/methodology/approach

An integrated macrofinancial analytical framework was designed to overcome the segregation between macro work, based on national accounting concepts, and prudential oversight of financial institutions, based on business accounting and concepts.

Findings

The design and implementation of the integrated macrofinancial framework are within reach, supported by extensive ongoing research work around the world, and correspond to rising expectations by the international community. It will lead to improvements in the way systemic banking crises are managed. Even more importantly, it offers a promising avenue to make further progress in the prevention of future crises.

Research limitations/implications

The main limitations are the need to overcome the well-known constraints of national accounting, and to overcome the enduring silo separating macro-economists from financial sector experts. The implications are the need for extensive additional interaction between these two groups of experts.

Practical implications

The practical, operational implications are extensive, and could yield a major impact on the global financial stability work agenda. The design of policy responses to systemic banking crises could be profoundly affected, in particular with regard to the target of these responses (corporates vs banks in particular).

Social implications

The direct and indirect costs of systemic banking crises could be reduced, with widespread benefits for society at large.

Originality/value

This is a fully original new proposed approach with extensive operational value for practitioners.

Keywords

Citation

Frecaut, O. (2017), "Systemic banking crises: completing the enhanced policy responses", Journal of Financial Regulation and Compliance, Vol. 25 No. 4, pp. 381-395. https://doi.org/10.1108/JFRC-02-2017-0024

Publisher

:

Emerald Publishing Limited

Copyright © 2017, International Monetary Fund.