Financial Regulatory Reform: Systemic Risk and the Federal Reserve. Updated May 26, 2010

摘要

The recent financial crisis contained a number of systemic risk episodes, or episodes that caused instability for large parts of the financial system. The lesson some policymakers have taken from this crisis is that a systemic risk or 'macroprudential' regulator is needed to prevent similar episodes in the future. But what types of risk would this new regulator be tasked with preventing, and is it the case that those activities are currently unsupervised. Some of the major financial market phenomena that have been identified as posing systemic risk include liquidity problems; 'too big to fail' or 'systemically important' firms; the cycle of rising leverage followed by rapid deleverage; weaknesses in payment, settlement, and clearing systems; and asset bubbles. The Federal Reserve (Fed) already regulates bank holding companies and financial holding companies for capital and liquidity requirements, and it can advise their behavior in markets that it does not regulate. In addition, the Fed directly regulates or operates in some payment, settlement, and clearing systems. Many too big to fail firms are already regulated by the Fed because they are banks, although some may exist in what is referred to as the shadow banking system, which is largely free of federal regulation for safety and soundness. The Fed's monetary policy mandate is broad enough to allow it to use monetary policy to prick asset bubbles, although it has not chosen to do so in the past. Neither the Fed nor other existing regulators have the authority to identify and address gaps in existing regulation that they believe pose systemic risk.