On Systemically Important Financial Institutions and Progressive Systemic Mitigation
Policy Discussion Paper Number 27
One of the most important issues in the regulatory reform debate is that of systemically important financial institutions. This paper proposes a framework for identifying and supervising such institutions; the framework is designed to remove the advantages they derive from becoming systemically important and to give them more time-consistent incentives. It defines criteria for classifying firms as systemically important: size (the classic doctrine of too big to let fail) and the four C’s of systemic importance (contagion, concentration, correlation, and conditions); it also discusses the concept of progressive systemic mitigation.
Suggested citation: Thomson, James, 2009. "On Systemically Important Financial Institutions and Progressive Systemic Mitigation," Federal Reserve Bank of Cleveland, Policy Discussion Paper no. 27.
Three-Tiered Proposal on the Drawing Board
To help explain the proposal to people who aren’t policy wonks.