Systemic risk in the financial sector; a review and synthesis

In a financial crisis, an initial shock gets amplified while it propagates to other financial intermediaries, ultimately disrupting the financial sector. We review the literature on such amplification mechanisms, which create externalities from risk taking. We distinguish between two classes of mechanisms: contagion within the financial sector and pro-cyclical connection between the financial sector and the real economy. Regulation can diminish systemic risk by reducing these externalities. However, regulation of systemic risk faces several problems. First, systemic risk and its costs are difficult to quantify. Second, banks have strong incentives to evade regulation meant to reduce systemic risk. Third, regulators are prone to forbearance. Finally, the inability of governments to commit not to bail out systemic institutions creates moral hazard and reduces the market’s incentive to price systemic risk. Strengthening market discipline can play an important role in addressing these problems, because it reduces the scope for regulatory forbearance, does not rely on complex information requirements, and is difficult to manipulate.

GPS Spoofing and the Financial Sector

All global financial exchanges, including the New York Stock Exchange (NYSE) and the Nasdaq, have gone digital. Large data centers hold the exchanges’ matching engines—the modern-day equivalent of the historic trading floor—in racks of interconnected servers. The Department of Homeland Security considers these data centers critical national infrastructure. Private security personnel, tall fences, and the best network security money can buy protect the integrity of the thousands of high-stakes trades executed every second within these data centers.Aerospace Engineering and Engineering Mechanic

Financial Sector Restructuring in Pakistan

In this paper an attempt has been made to review the financial restructuring process and its importance for economic growth and macroeconomic stability. The main focus is on the financial restructuring efforts undertaken by the government of Pakistan since 1990. We alsoanalyze the impacts of financial restructuring by using various financial indicators. The overallresults suggest that financial industry in Pakistan showing remarkable and unprecedented growth.Unlike 1990, the performance of financial sector is much better today. After the successfullycompletion of first generation of reforms, the introduction of second generation of reforms arerequired, which helps further strengthen the financial system and transform the benefits of the first generation of reforms to common man.

Implications of financial sector consolidation

Bank mergers ; Consolidation and merger of corporations

Designing an Integrated Financial Supervision Agency: Selected Lessons and Challenges for Indonesia

Having initiated reforms in its financial sector in late 1997, the government of Indonesia introduced a new central bank independence act in early 1999. The next task for the government of Indonesia is to devise a safety net system for the financial sector. This study draws essential lessons from the experiences of other countries to highlight a number of key challenges facing Indonesia, especially at early stages of designing its unified financial sector supervisory agency.Unified Financial Sector Supervisory Agency, Bancassurance Central Bank, Indonesia.

Uncertainty, financial development and economic growth: an empirical analysis

This paper examines whether financial sector development may partly undo growth-reducing effects of policy uncertainty. By performing a cross-country growth regression for the 1970-1995 period I find evidence that countries with a more developed financial sector are better able to nullify the negative effects of policy uncertainty on per capita economic growth. For countries with a very well developed financial sector, it may even be the case that an increase in policy uncertainty positively affects per capita economic growth. This clearly indicates the relevance of financial sector development.