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Contribution Details

Type Journal Article
Scope Discipline-based scholarship
Title An industrial organisation approach to the too-big-to-fail problem
Organization Unit
  • Jean-Charles Rochet
Item Subtype Original Work
Refereed No
Status Published in final form
Journal Title Revue de la stabilité financière / Financial Stability Review
Publisher Banque de France
Geographical Reach international
ISSN 1637-4681
Volume 14
Page Range 93 - 100
Date 2010
Abstract Text This article suggests a reform of the organisation of money markets that would largely eliminate the risk of contagion. The notion of “systemically important institution” would be replaced by that of systemically important platform”. Such platforms would only be directly accessible to a group of “offi cially recognised fi nancial institutions” that would have to comply with special regulatory requirements and would be directly supervised by the central bank. The status of “offi cially recognised fi nancial institution” could be revoked by the central bank if these special regulatory requirements are not satisfi ed. A special resolution procedure would be created for these institutions, so that the central bank has the legal powers to close it down, or at least restrict its activities before it is too late. OTC markets would still be active but, since they would be penalised by regulation, it is likely that they would become small, and therefore not in a position to jeopardise the entire system.
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