SUERF/UniCredit & Universities Foundation Workshop in Vienna
The economic, financial and sovereign debt crisis has triggered a wave of new regulation for banks and the financial sector at large. The aim is to avoid, or at least to reduce the probability, of future financial crises. First, to start with, through tighter and more comprehensive regulation as well as supervision, financial firms and markets are hoped to become more resilient; second, enhanced toolkits and sharply increased resources should put supervisors in a position to detect risks in the financial sector on time and to take appropriate countervailing action; third, new procedures for restructuring of financial firms and for bailing in owners and creditors aim to reduce ex post the cost for tax payers in the event of failure and to correct ex ante moral hazard and distortionary incentives arising from too-big-to-fail etc. This new framework for regulation and supervision has been accompanied by a comprehensive body of new theoretical, empirical and policy-oriented research, much of which is still unfolding and developing further. Practical experience with the new regulatory and supervisory regime is only starting. Some advance quantitative estimations of the consequences of various types of new regulation showed sharply divergent effects.