Enrico Perotti, Javier Suarez, 11 February 2009

Most financial system reform proposals rely on better managed, anti-cyclical capital requirements, or some sort of insurance. This column argues that mandatory liquidity insurance would be more effective. The insurance premiums – linked to maturity mismatch and term structure – would essentially be pre-payment for the cost of future financial crises and held in an Emergency Liquidity Insurance Fund.

Hans Gersbach, 07 September 2011

Current regulation imposes fixed capital requirements on banks. However, this makes it impossible to use regulatory capital as a buffer against negative macroeconomic shocks. This column explains how this paradox could be resolved by basing capital requirements each year on average bank equity capital in the industry.

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