BIS Publishes Paper on Systemic RiskJaime Caruana, general manager of the the Bank of International Settlements (BIS), published a paper that analyzes systemic risk and considers appropriate policies to reduce it.
He argues that policies to reduce externalities in the cross-sectional dimension seek to limit the damage that can arise from inter-linkages and common exposures, while policies to address pro-cyclicality seek to build up capital and liquidity margins of safety during the upswing that can be drawn upon in the downturn.
Caruana also notes that financial regulatory policies are not enough to address systemic risk, while other policies, especially monetary and fiscal policy, have a role to play. He advocates for policy coordination at a national level to deal with monetary, fiscal and macro- and micro-prudential policies, as well as internationally.
BIS paper ~
BIS paper ~
