Dealing with systemic risk when we measure it badly

While an omniscient regulator would base a bank’s capital requirement upon its contribution to systemic risk, Jon Danielsson shows that a regulator who measures a bank’s contribution to systemic risk badly will find it optimal to use a simple leverage ratio instead.  Jon Danielsson is an economist teaching at the London School of Economics and active in domestic and international policy debates.

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Image courtesy of the interviewee


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