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A perspective on the symptoms and causes of the financial crisis
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Orientador(es)
Resumo(s)
This article identifies two paradoxes prior to the onset of the financial crisis: banking profits were at historically high levels despite the impending crisis; and though profits were high the profitability of financial intermediation was poor. Using a novel model of banking, it argues that large banks attained high profits through balance sheet expansion and growing mismatches between assets and liabilities. As a result, large banks’ financial leverage rose while their liquidity structure worsened, setting the conditions for a systemic banking crisis.
Finally, this article argues that this conduct and performance was only possible due to misguided changes to the regulatory framework, specifically the Basel I Capital Accord and reductions in reserve requirements.
Descrição
Palavras-chave
Banking Basel Capital Accords Financial Crisis Financial Intermediation Reserve Requirements
Contexto Educativo
Citação
Cabral, Ricardo (2011). A perspective on the symptoms and causes of the financial crisis, “Working Paper Series” nº 9/11, 49 pp.. Ponta Delgada: Universidade dos Açores, CEEAplA-A.