Global Financial Crisis and Risk Management in Financial Intermediaries: Is it White Page?
Conference on Financial Engineering, October 20-21, 2011, Izmir University of Economics, Izmir, Turkey
12 Pages Posted: 17 Nov 2011 Last revised: 23 Nov 2011
Date Written: October 20, 2011
Abstract
One of the impacts of financial liberalization/deregulation to the risk management and regulation mechanisms is self regulation. In the context of self regulation, it is expected that financial intermediaries may internally develop risk management rules, define capital level based on economic capital (instead of required capital) and develop corrective measures to firm wide risk management problems, before regulators. In this article, the authors analyze whether self regulation approach is successful. In the light of literature and lessons of firm/system wide financial failures, we also analyze the risk discipline methods of self and official disciplines and their degree of efficiency. In this framework, we first conclude, however it may not provide optimal solutions to the risk management problems of financial intermediaries, more efficient risk management standards should develop. Secondly, based on observations of various firm/system wide failures in financial intermediaries, the authors believe more self regulation may increase risks of financial failures and systemic crisis.
Note: Downloadable document is in Turkish.
Keywords: risk, risk management, financial intermediares, bankruptcy, financial failure
JEL Classification: G32, G01, G21
Suggested Citation: Suggested Citation