Procyclicality: Difference between revisions
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imported>Doug Williamson (Create page. Sources: linked pages and BIS Review 94/2009) |
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== See also == | == See also == | ||
* [[Bank]] | |||
* [[Bank supervision]] | |||
* [[Basel III]] | |||
* [[Buffer]] | |||
* [[Capital]] | |||
* [[Capital adequacy]] | * [[Capital adequacy]] | ||
* [[Capital buffer]] | |||
* [[Countercyclical]] | * [[Countercyclical]] | ||
* [[Countercyclical buffer]] | |||
* [[Cumulative]] | |||
* [[Cyclical]] | * [[Cyclical]] | ||
* [[Deviation]] | |||
* [[Economy]] | |||
* [[Equilibrium]] | |||
* [[Herd behaviour]] | * [[Herd behaviour]] | ||
* [[Leverage]] | * [[Leverage]] | ||
* [[Procyclical]] | * [[Procyclical]] | ||
* [[Prudential]] | * [[Prudential]] | ||
* [[Total Loss Absorbing Capacity]] | * [[Regulator]] | ||
* [[Supervision]] | |||
* [[Total Loss Absorbing Capacity]] (TLAC) | |||
* [[Trend]] | |||
[[Category:Accounting,_tax_and_regulation]] | [[Category:Accounting,_tax_and_regulation]] | ||
[[Category: | [[Category:Financial_products_and_markets]] | ||
[[Category:Identify_and_assess_risks]] | |||
[[Category:Investment]] | [[Category:Investment]] | ||
[[Category:Long_term_funding]] | [[Category:Long_term_funding]] | ||
[[Category:Manage_risks]] | [[Category:Manage_risks]] | ||
[[Category:Risk_reporting]] | |||
[[Category:Risk_frameworks]] | [[Category:Risk_frameworks]] | ||
[[Category: | [[Category:The_business_context]] | ||
Revision as of 23:12, 21 November 2023
Bank supervision - capital adequacy - leverage.
The tendency of financial systems to amplify fluctuations in the economic cycle.
- Interaction and amplification
- "Herd behaviour has long been known to be an essential feature of financial markets.
- More subtly, individual reactions, by themselves rational, can, by the virtue of their mutual interaction, produce strong amplification effects.
- A broader definition of procyclicality would thus encompass three components, which cannot easily be distinguished in real life:
- (1) fluctuations around the trend
- (2) changes in the trend itself and
- (3) possible cumulative deviations from equilibrium value.
- This points to the policy challenges regulators face.
- They have to try and identify when pure cyclical fluctuations morph into something different: either a change in the trend itself or the start of a cumulative process."
- Jean-Pierre Landau, Deputy Governor of the Bank of France, BIS Review 94/2009.