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It might also be worth assessing risk over a longer period than just one year, now the standard practice, or raising some banks' capital requirements if their size means that they make a disproportionate marginal contribution to system-wide risk.
The framework presented in this paper can be adapted to address a broader set of risk reduction strategies and is intended to assist decision makers for local, regional and system-wide risk management of rail hazardous materials transportation.
There are also many specific examples, prior to the 2008 crisis, of regulators claiming they were focused on system-wide risk.
These two facts alone make it pretty hard to argue federal regulators were not focusing on system-wide risk prior to the 2008 crisis.
My guess is that fiduciary standard, a critical measure for the little guy, will be overshadowed by things like system-wide risk, proprietary trading, derivatives and the creation of a consumer protection agency.
President Obama and Treasury Secretary Geithner, in a joint appearance in the Oval Office Wednesday morning, said the U.S. is working with the world's largest economies to coordinate regulation and prevent system-wide risk to the global financial system.
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He would like to see an explicit distinction between system-wide risks and those peculiar to individual banks.
If this scenario is closer to reality, regulators ought to worry more about system-wide risks and less about the balance sheets of individual banks.
With all these caveats, I believe that an increased focus on system-wide risks by regulators and supervisors is inevitable and desirable.
Dodd-Frank is so complex and expensive, industry insiders tell me, that it drives small banks into the arms of larger banks, arguably exacerbating system-wide risks.
The dual trigger is highly correlated with system-wide insolvency risk and prices systemic risk.
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