Large and Complex Financial Institutions: Challenges and Policy Responses : Lessons from Sweden
International Monetary Fund, Monetary and Exchange Affairs Department, Mar 1, 2003 - Banks and banking - 24 pages
This paper examines the regulatory and supervisory implications stemming from the dominance of large and complex financial institutions, drawing on the recent Financial Sector Assessment Program (FSAP) mission work on Sweden. The analysis highlights the importance of consolidated supervision, of a greater emphasis on effective management and corporate governance structures, and of measures strengthening the disciplinary role of the private sector. It calls for developing credible liquidity and crisis management arrangements through appropriate attention to the cross-product and cross-border nature of large and complex financial institution (LCFI) operations. Strengthened supervisory and regulatory responses will enable financial markets to better assess the nature and sources of residual risks they have to face and, on this basis, to develop more effective risk-mitigating measures.
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additional adequacy analysis asymmetric information balance sheet business areas central banks challenges posed complexity Contact Group contagion risk counterparties credit risk crisis management arrangements crisis simulation exercises critical importance cross product cross-border and cross emergency liquidity assistance exacerbate moral hazard financial groups financial institutions financial sector surveillance Financial Services Industry financial stability reports Finland give rise greater group level group-wide impact insurance arm International Monetary Fund krona large exposures LCFI operations LCFI's linkages liquidity problems macroeconomic management and corporate market discipline market risk ministries of finance monitor Nordea Group Nordic area Nordic countries operations of LCFIs overall operations payment system policy response posed by LCFIs Regulatory and Supervisory risk exposures risks facing scenario securities activities solo solvency problems Stockholm Stock Exchange stress tests subgroup supervision and regulation supervisory authorities Supervisory Challenges Sveriges Riksbank Swedbank Sweden Swedish financial system Swedish LCFIs systemic risk taking account vulnerabilities yield curve