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Systemic Risks. FMRI (F) - Book Report/Review Example
Author : vandervortcharl
Pages 10 (2510 words)
This present research aims to evaluate and present the issue of systemic risk; systemically important financial institutions and importance of systemically important financial institutions in banking reform and financial regulation. …
The intention of this study is Systemic Risks as a succession of cascading effects that can take place under specific conditions in several kinds of complex systems and which ultimately lead to a catastrophic situation. These risks can occur in a group of engineering plants, an arrangement of ecological structures, a set of closely-linked financial institutions and so on. The Organization for Economic Cooperation and Development (OECD) first used the notion of ‘systemic risk’ in one of its reports in 2003. In 2000, a series of systemic risks in United Kingdom’s banking sector had resulted in a major financial crisis in this sector. The systemic series of events usually occur without signaling any prior warning to the system and progress rapidly resulting in a significant deterioration in the existing state of affairs. Once the cascading events start taking place one after another, it becomes very difficult to put a stop to the process. Systemic risks can degrade a stable existing system to an extremely low state, where the latter performs much below its potential level for a considerable period of time. More serious systemic risks and their resulting events can even destroy an established system altogether. Financial analysts believe that the global financial crisis of 2008 was actually triggered by the systemic risks existing in the US banking sector. The international financial regulatory institutions had not been strict about enforcing certain banking regulations like the Basel II norms, which had been formulated to insure the against these risks. ...