The Limits of Model-Based Regulation

Forschungsbereich: Financial Stability, Financial Regulation
Forscher: Markus Behn,
Rainer Haselmann,
Vikrant Vig
Datum: Jan 2014
Abstract:

In their IMFS Working Paper, Markus Behn, Rainer Haselmann and Vikrant Vig identify the limits of model-based regulation in the financial sector. Based on the data of the introduction of Basel II in Germany in the aftermath of the financial crisis of 2007, the authors of the study have analyzed how the implementation of model-based regulation affect the stability of the financial sector. Hence, they investigated the development of default rates and interest rates. The authors suggest "that simpler rules may increase the efficacy of financial regulation". (16.09.14)

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