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Systemic Risk and Macroprudential Regulations

Systemic Risk and Macroprudential Regulations
Global Financial Crisis and Thereafter

First Edition

December 2019 | 508 pages | SAGE India

The Global Financial Crisis is undoubtedly the most severe financial crisis the world witnessed since the Great Depression of 1929. The crisis has been analysed by a number of experts offering distinct narratives and counter-narratives.

Systemic Risk and Macroprudential Regulations
examines causes and consequences of the global financial crisis and proposes a regulatory reforms policy—macroprudential regulations. The book emphasizes ‘systemic risk’ as the new-found villain of the financial space and narrates how such risk can be addressed through macroprudential tools. It, thus, offers a possible solution to avoid financial crises in future and facilitates building a safer financial system globally. The book also examines major crisis management frameworks, stress testing, relevant regulatory and supervisory development, and early warning mechanism with detailed cross-country analysis.

Foreword by Benjamin M. Friedman
Part I: Post-crisis Financial Regulatory Reform
Strengthening Capital and Liquidity Requirements
Regulatory Framework Beyond Capital and Liquidity
Part II: Managing Systemic Risk through Macroprudential Policy
Macroprudential Policy
Early Warning Systems
Stress Testing Programme
Tools for Macroprudential Policy
Part III: Managing Financial Crisis
Financial Crisis Management Framework
Part IV- Coordination in International Policymaking
Dynamics of International Policy Coordination
New Approaches to International Policy Coordination
Macrofinancial Policy Coordination in the Current Milieu
Epilogue: Potential Concerns for Central Banks

An excellent study of the causes and effects of the Global Financial Crisis. The author judgement is good and his writing is clear and lucid. It is a fine contribution to the literature in this field, and those who wish to learn about the GFC will benefit by reading it.

Charles A. E. Goodhart,
Professor, The London School of Economics and Political Science, UK

I have seen the chapter outlines, and I am deeply impressed by the coverage. It includes a good literature survey and has raised almost all critical issues that surfaced after the crisis. It is indeed a comprehensive book and has the added merit of a view from a seasoned central banker of a developing country. This book should be useful not only to policymakers but also to the regulators and practical bankers.

C. Rangarajan,
Former Chairman, Economic Advisory Council to the Prime Minister; Former Governor, RBI; Chairman, Madras School of Economics, Chennai, India

Dr Mishra should be complimented for writing an eminently readable book on a complex subject of great contemporary interest. The impact and implications of Global Financial Crisis on the theory and practice of financial sector are brought out very clearly. It has the imprint of deep insights, long experience and clarity in articulation. The book should be of interest to academics as well as practitioners, since it explores public policy, keeping in view the lessons from Global Financial Crisis.

Y. V. Reddy,
Former Governor, Reserve Bank of India, India

The Global Financial Crisis, the deepest and the most ferocious since the Great Depression of the 1930s, triggered an enormous amount of analysis aimed at understanding its causes and consequences. A lot has already been written about the lessons learnt from the crisis, the reforms instituted drawing from those lessons, and importantly, whether the corrective action is insurance enough against another crisis. Even in such a crowded intellectual field, this book stands out for its comprehensive coverage, cogent argumentation and real-world perspectives. It is a testimonial to Mishra’s passion for scholarship and commitment to analytical rigour.

P. V. Subba Rao,
Former Governor, Reserve Bank of India, India

Many lessons have been learned from the Global Financial Crisis leading to several reforms which have been elucidated excellently and comprehensively in the book. As the title indicates, macroprudential regulation is evolving but the book could not have come at a more propitious time since we face the danger of forgetting the causes and consequences of the crisis leading to calls for a dilution of the regulatory framework. The book raises relevant questions and also provides solutions. It is a great work, which I strongly recommend for general and for teaching purposes.

Shyamala Gopinath,
Chairperson, HDFC Bank, and Former Deputy Governor, Reserve Bank of India, India

Macroprudential policy represents a paradigm change in the regulation of the financial system in the aftermath of the Global Financial Crisis. It is a new area and there is considerable amount of research going on. Dr Rabi Mishra’s book covers vast ground in this area. It is a comprehensive book capturing the nuances of one of the biggest crises that the financial world ever saw. Dr Mishra has indeed taken pains to put together the full wherewithal of the Global Financial Crisis and the evolution of the financial world thereafter. The book covers almost all important issues in the design and implementation of macroprudential policy and would be of immense benefit to researchers, central bankers, regulators, policymakers and students.

Anand Sinha,
Former Deputy Governor, Reserve Bank of India, India

Ten years after the financial crisis, lessons are still being drawn and debated about the causal factors and appropriate responses to them. One area of broad consensus is that portfolio decisions of large financial institutions could have macroeconomic consequences. The paradigm of macroprudential regulation is based on this premise. Dr Mishra was an early participant in this process by virtue of his association with the RBI’s Financial Stability Unit. He combines his analytical skills with his practical exposure and experience in this book, bringing a very important emerging market perspective to this critical issue. It will be a major contribution to a growing literature.

Subir Gokarn,
India’s Executive Director at IMF and Former Deputy Governor, Reserve Bank of India, India

It is a delightful guide, full of important information for those of us who want to know everything about the Global Financial Crisis (GFC)—its origin, its impact and its consequences. The biggest learning from the GFC was the fact that the silo-based approach from the regulator is not going to work anymore and the extant macro view needs to be diligently strengthened across the world. Dr Mishra was one of the key minds behind the development of the macroprudential framework at the RBI and the way he has dealt with the subject reciprocates his in-depth grasp on the subject.

H. R. Khan,
Former Deputy Governor, Reserve Bank of India, India

Since the Global Financial Crisis of 2007–2008, the economics profession, the central banks, financial regulators and the international financial institutions (IFIs) have been searching their souls to understand what went wrong and how to prevent such a disaster from happening again. Much of the blame for the GFC has been placed on the central banks, financial regulators and supervisors in each country, as well as on the international financial regulatory institutions for failing to foresee the problems in the financial system and for not doing their jobs, that is, of being asleep at the switch.

In his timely and very important book, Rabi N. Mishra, an official at the Reserve Bank of India and a specialist in financial regulation, has written a highly useful survey of the issues and the solutions to financial instability proposed by the financial authorities in the key advanced countries and in the IFIs, especially the BIS and FSB. The chapters in the book explain in useful detail the state-of-the-art new tools of macroprudential regulation being developed, especially capital and liquidity ratios, and other techniques such as stress tests and international standards and policy cooperation. This book will be of enormous value to regulators, financial practitioners and students of the international financial system.

Michael D. Bordo,
Distinguished Professor of Economics, Rutgers University, Distinguished Visiting Fellow at the Hoover Institution, Stanford University, USA

This book is a tour de force! Dr Mishra has a sure grasp of the microeconomics of finance which allows him to explain in simple terms those key areas which need effective regulation—asymmetric information, principal–agent problems, the tragedy of the commons and many others. He understands the close link monetary policy has with systemic risk. He has been a consummate insider in the international regulatory reform process for years. But he does not hesitate to identify the intellectual blind spots and wishful thinking of some of those in the regulatory community.

Philip Turner,
PhD (Harvard), former member of the senior management of the Bank for International Settlements, and Deputy Head of Bank for International Settlements’s Monetary and Economic Department, Switzerland
Key features
• Examines reasons for the Global Financial Crisis and subsequent damage control initiatives

• Examines recommendations given by Financial Regulation committees on Post-global financial crisis 

• Explains the difference between complex traditional monetary policy making and the newly-born macroprudential policy making. 

• Discusses financial risk in the context of cyber banking


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ISBN: 9789353289126
ISBN: 9789353285425

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