Systemic Risk and Macroprudential Regulations: The Global Financial Crisis and Thereafter

• ISBN13: 9789372260236
• Binding: Hardcover
• Subject: Business Management
• Publisher: Atlantic Publishers & Distributors (P) Ltd
• Publisher Imprint: Atlantic
• Publication Date: July 17, 2026
• Pages: 598
• Original Price: INR 1795.0
• Language: English
• Edition: Second Revised Edition
• Item Weight: 820 grams
• BISAC Subject(s): Banks & Banking, Finance / General, and Economics / Macroeconomics

Systemic Risk and Macroprudential Regulations: The Global Financial Crisis and Thereafter delves into the evolution of financial stability and systemic risk in the wake of the Global Financial Crisis (GFC) and subsequent financial stress episodes. This revised edition combines theoretical insights with practical applications, offering a unique combination of policy discussions, expert perspectives and empirical case studies. Organised into four comprehensive parts, the book covers the evolution of systemic risk, the introduction of macroprudential policies, critical post-GFC reforms and the global dimensions of financial stability. With a focus on tools such as stress testing, Early Warning Systems (EWS) and cross-border cooperation, it offers a detailed analysis of how institutions are working to build resilience in the face of ever-evolving financial threats. Ideal for policymakers, regulators, academicians, students and financial analysts, this book offers vital insights into building a safer, more resilient financial system in today's interconnected world.

Dr Rabi N. Mishra is the RBI Chair Professor at the Gokhale Institute of Politics and Economics, Pune. He brings over four decades of experience from the Reserve Bank of India, where he served as Executive Director (Supervision & SupTech) and was the Founder-Director of the College of Supervisors. He holds a PhD from the University of Mumbai and an MA from Jawaharlal Nehru University. He was a research scholar at the Delhi School of Economics and has also undertaken post doctoral research at Harvard University. A pioneer in the field of financial stability, Dr Mishra has led key functions at the RBI and contributed to global financial discourse. Currently, he serves as an independent director and chairman at various financial institutions in India.

• Foreword ....................xxiii
• Preface to the Second Edition ....................xxxix
• Preface to the First Edition ......................xli
• Acknowledgements ...............xlv
• Introduction and Executive Summary.................................xlvii
• PART I
• Changing Facets of Systemic Risk
• 1. The Global Financial Crisis and Stress Episodes of the Early 2020s .....................3
• When the Music Stopped—The Global Financial Crisis.........5
• When COVID-19 Flight to Safety Spiralled into a Dash for Cash ......................20
• How LDI Pension Funds Amplified the 2022 UK Gilt Market Turmoil ..................24
• How Bank Runs and Concentration Risks Led to the 2023 Bank Failures .................28
• Credit Suisse Failure (2023): Bad Legacy and Sleepwalking into Counterparty Concentrations..................32
• Conclusion ..................33
• References ...................34
• 2. Systemic Risk and Financial Stability.............................35
• Macrofinancial Trends, Real Economy and Systemic Stability .......................35
• Defining Systemic Risk—The Whole is Greater than the Sum of Parts .................38
• Systemic Risk as a Threat to Financial Stability...................43
• Dimensions of Systemic Risk—Cyclical and Structural........45
• Systemically Important Firms ...............51
• The Too Big to Fail (TBTF) Problem...................................51
• Conclusion ..................52
• References ...................52
• 3. Structural Changes Affecting Systemic Risk Post GFC.....55
• Progress with Post-GFC G20 Reforms: Banks and CCP Resilience ....................57
• Regulatory and Policy Constraints of the Post-GFC World ..........................59
• Challenges from the Transitioning Monetary Policy Environment ................64
• New Amplification and Propagation Channels of Systemic Risk .....................68
• Conclusion ..................76
• References ...................77
• PART II
• Macroprudential Regulation to Address Systemic Risk
• 4. Macroprudential Policy and Framework........................81
• What is the Right Policy Response to Address Systemic Risk? ...........................81
• Limitations of Monetary Policy and Microprudential Supervision ..................82
• Key Elements of a Macroprudential Policy Framework.......95
• Macrofinancial Risk Surveillance Architecture—Country Examples ................104
• Scope of Macroprudential Policy ...............108
• Coordination of Macroprudential Policy with Other Policy Areas ...............109
• Macroprudential Policy and the Resolution Framework....113
• Conclusion ................113
• References .................114Contents xvii
• 5. Macroprudential Tools .................119
• Categorisation of Macroprudential Tools..........................120
• Macroprudential Nature of Capital Flow Management and Currency Mismatch Tools ...................121
• Approaches to Designing Macroprudential Tools..............123
• Challenges in Implementing Macroprudential Tools..........138
• Conclusion ................151
• References .................152
• 6. Early Warning Systems ..................157
• Characteristics of EWIs ......................159
• Efficiency of EWM—SEA ...................166
• Early Warning Indicators ....................168
• Multiple Indicator Approach .....................172
• Index on Speculative Pressure ....................173
• The Index of Macroeconomic Vulnerability.......................176
• Banking Sector Vulnerability .....................178
• Early Warning System for India .................178
• Scope for Future Research ..................180
• Conclusion ................183
• References .................185
• 7. Macroprudential Stress Testing....................................197
• Stress Testing—Objectives, Key Steps and Approaches......197
• Evolution of Stress Testing as a Prudential Tool.................208
• Stress Testing beyond Banks ...............218
• Components of Stress Testing in the Post-GFC World.......221
• Scenarios that Capture One-Off Known Knowns and Unknowns .................223
• Exploratory Scenarios to Understand Vulnerabilities.........225
• Capturing Feedback Loops and Amplification Channels....228
• Stress Testing Practices—A Cross-Country Overview........230
• Stress Testing: Best Practices (BCBS)..................................236
• Stress Testing and Other Quantitative Analyses and Simulations ................238
• Conclusion ................239
• References .................242
• 8. Macroprudential Policy Beyond the Banking Sector....247
• Macrofinancial Significance of the Non-Bank Financial Sector ........................247
• Macroprudential Policy Initiatives to Address Risk from NBFIs ...............256
• Potential Systemic Risk Posed by Crypto Assets, DeFi and AI .......................261
• Global Regulatory Coordination ...............263
• Conclusion ................264
• References .................264
• PART III
• Adjunct Policy Areas Relevant to Systemic Risk
• 9. Post-GFC Reforms in Capital and Liquidity.................269
• Institutional Changes for International Regulatory Coordination ....................273
• RWA—Removing Loopholes to Manipulate the Denominator in the Capital Adequacy Ratio.....................281
• Basel III December (2017) Revisions to the IRB Approaches ...............282
• Basel IV (As Popularly Called)—Obligatory Capital Floors ........................284
• Liquidity Adequacy and Funding Structure Reforms.........289
• Lacunae in the Basel Liquidity Regulation.........................293
• Basel III Implementation Timeline and Impact...................296
• Improvement in Quantity and Quality of Capital and Liquidity .........................300
• Evidence of Impact from Recent Research.........................301
• Impact During the COVID-19 Crisis.................................304
• Impact Analysis of Capital Regulations.............................305
• Impact Analysis of Liquidity Regulation............................309Contents xix
• Latest Implementation Status of Global Regulatory Reforms Agenda ...............313
• Conclusion ................315
• References .................315
• 10. Prudential Reforms Beyond Capital and Liquidity.......321
• Market Discipline and Conduct .................322
• Strengthening of Regulation and Supervision in OTC and Commodity Derivatives Markets.......................327
• Non-Centrally Cleared Derivatives....................................332
• Ratings by Credit Rating Agencies: Need to Reduce Sole Reliance ....................333
• Executive Compensation Practices: A Revisit.....................338
• Compensation Practices in Banking Organisations............341
• Harmonisation of Accounting Standards...........................342
• Legal Entity Identifier .........................344
• Culture of Risk and Governance ...............345
• Regulating Systemic Risk: Walking a Tightrope?...............350
• Risks from Digitalisation of Finance—The New Animal to Regulate ...............351
• Risks of Climate Change—A Known Unknown Risk........352
• Risks Out of Business Models and Strategies.....................353
• Supervision of IRRBB and Implementation of the IRRBB Standards ...............355
• Role of Supervisory Judgement and Effectiveness..............356
• Change of Stance of Supervision—From a “Post-Mortem” One to a “Pre-Mortem” One.............................358
• Change of Stance of Supervision—From “Stability to Resilience” ...................359
• Conclusion ................360
• References .................361
• 11. Financial Crisis Management Framework....................365
• Pre-requisites for a Crisis Management Framework...........369
• Operating Entity/Arrangement for Systemic Risk Assessment ................371
• Institutional Reforms for Crisis Management....................373
• Financial Crisis Simulation Exercises (FCSE) should be Undertaken ................377
• Non-Market Events and Financial Crisis...........................377
• The Four Pillars of Policy Formulation for Financial Crisis Management ...............378
• Resolution Regimes—Need for an Independent Resolution Authority and Bankruptcy Code......................390
• Resolution and Insolvency Regimes...................................394
• Public Recapitalisation Programme for Resolution............404
• Resolution Models for Cross-Border Banks (Bolton et al., 2018) ...............406
• Bank Transfers—The Recent Resolution Tool Used...........408
• Takeaways from the Research on Resolution Strategies at FSI, BIS ..................409
• Resolution of the SVB UK Subsidiary................................411
• A Paradigm Shift in the Thought Process on CMF.............412
• Conclusion ................413
• References .................414
• 12. Using Central Bank Balance Sheet to Address Systemic Risk ...............417
• Systemic Liquidity and the Central Bank Toolkit...............418
• Drawing on Traditional Central Bank Liquidity Support Principles ................418
• Conclusion ................427
• References .................428
• PART IV
• Stemming the Effects of Global Macrofinancial Spillovers
• 13. Interconnectedness and Macrofinancial Policy Spillovers ....................433
• The Economic and Financial Reintegration to Stem the Effects of Global Spillovers ..................447
• Conclusion ................454
• References .................454Contents xxi
• 14. Towards a Cross-Border and Inter-Regulatory Coordination ...............461
• Constructive Economic and Financial Regional Blocs........461
• Towards a Cross-Border and Inter-Regulatory Coordination ....................468
• Conclusion ................498
• References .................506
• List of Abbreviations ...............511
• Epilogue .......................517
• Index ............................519
• About the Authors ...............541