Basel II, Regulation and the Sub-Prime “Crisis”

Michael W. Taylor
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Michael W. Taylor: Hong Kong Monetary Authority, Hong Kong

Chapter 32 in Globalization and Systemic Risk, 2009, pp 429-436 from World Scientific Publishing Co. Pte. Ltd.

Abstract: AbstractThe papers at this conference have developed a coherent and consistent explanation of the causes and consequences of what, we are generally agreed, would be premature to call the sub-prime “crisis”. The consensus of opinion is that the recent turmoil in the credit markets has its roots in the “originate and distribute” model of banking that has become such a central feature of the financial system in the past decade. Until recently, central bankers and regulators have perhaps been a little too ready to assume that this was a trend that had market-stabilizing properties. In particular, we have tended to suppose that collateralized debt obligations (CDOs) and credit derivatives have allowed risk to be distributed around the financial system so that no single institution would have a life-threatening concentration of bad assets. While this is one possible consequence of recent financial innovation, it has also had some less welcome consequences for financial stability that this conference has identified…

Keywords: Globalization; Banking; Financial Markets; Systemic Risk; Financial Crisis; Contagion (search for similar items in EconPapers)
Date: 2009
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