Financial Stability in Practice

Charles A.E. Goodhart, Emeritus Professor of Banking and Finance, and long-standing member of the Financial Markets Group, at the London School of Economics, UK and Dimitrios P. Tsomocos, Professor University Reader in Financial Economics and Fellow in Management, Saïd Business School and St. Edmund Hall, University of Oxford, UK

• Contents: 1. Introduction Charles A.E. Goodhart and Dimitrios P. TsomocosPART I: THE DEVELOPMENT OF FINANCIAL REGULATION2. ‘Financial Supervision from an Historical Perspective: Was the Development of Such Supervision Designed, or Largely Accidental?’, Charles A.E. Goodhart, in David Mayes and Geoffrey E. Wood (eds), The Structure of Financial Regulation, London, Routledge, 2007, pp.43–643. ‘The Rationale for Regulation’, Charles Goodhart, Philipp Hartmann, David Llewellyn, Liliana Rojas-Suárez and Steven Weisbrod, Financial Regulation: Why, How and Where Now?, London: Routledge, 1998, pp.1–154. ‘Some New Directions for Financial Stability?’, C.A.E. Goodhart, in D. Mayes, R. Pringle and M. Taylor (eds), Towards a New Framework for Financial Stability, London: Central Banking, 2009, pp.5–245. ‘The Role of Macro-Prudential Supervision’, paper presented by C.A.E. Goodhart at the Federal Reserve Bank of Atlanta Conference on ‘Up from the Ashes: The Financial System after the Crisis’, May 11/12, 2010, Atlanta, Georgia6. ‘How Should We Regulate the Financial Sector?’, Charles Goodhart, in Adair Turner, Andrew Haldane, Paul Woolley, Sushil Wadhwani, Charles Goodhart, Andrew Smithers, Andrew Large, John Kay, Martin Wolf, Peter Boone, Simon Johnson and Richard Layard (eds), The Future of Finance: The LSE Report, London: School of Economics & Political Science, 2010, pp.153–76PART II: MODELLING 7. ‘A Model to Analyse Financial Fragility’, Charles A.E. Goodhart and Lea Zicchino, Financial Stability Review, June 2005, 106–158. ‘Equilibrium Analysis, Banking, Contagion and Financial Fragility’, Dimitrios P. Tsomocos, Working Paper 175, Bank of England, 2003, 1,3,5,7–599. ‘The Optimal Monetary Instrument for Prudential Purposes’, with P. Sunirand, Journal of Financial Stability, 7, 2011, 70–7710. ‘On Dividend Restrictions and the Collapse of the Interbank Market’, with M.U. Peiris and A.P. Vardoulakis, Annals of Finance, 6 (4), 2010, 455–73PART III: MEASUREMENT 11. ‘Towards a Measure of Financial Fragility’, with Oriol Aspachs and Lea Zicchino, Annals of Finance, 3 (1), 2007, 37–7412. ‘Searching for a Metric for Financial Stability’, with O. Aspachs, M. Segoviano and L. Zicchino, Financial Markets Group Special Paper 167, London School of Economics, 2006 13. ‘Banking Stability Measures’, Miguel A. Segoviano and Charles Goodhart, IMF Working Paper, WP/09/4, January 2009, 1–5414. ‘Default, Credit Growth and Asset Prices’, C.A.E. Goodhart, Boris Hofmann and M. Segoviano, in Charles Goodhart and Boris Hofmann (eds), House Prices and the Macroeconomy, Oxford: Oxford University Press, 2007, pp.145–72PART IV: CAPITAL REQUIREMENTS AND PROCYCLICALITY 15. ‘Procyclicality and the New Basel Accord – Banks’ Choice of Loan Rating System’, Eva Catarineu-Rabell, Patricia Jackson and Dimitrios P. Tsomocos, Economic Theory, 26 (3), 2005, 537–57 16. ‘Basel and Procyclicality: A Comparison of the Standardised and IRB Approaches to an Improved Credit Risk Method’, C.A.E. Goodhart and M. Segoviano, Financial Markets Group Discussion Paper 524, London School of Economics, 200417 ‘Procyclicality and Volatility in the Financial System: The Implementation of Basel II and IAS 39’, Ashley Taylor and Charles Goodhart, in Stefan Gerlach and Paul Gruenwald (eds), Procyclicality of Financial Systems in Asia, Basingstoke, UK: Palgrave Macmillan, 2006, pp.9–3718. ‘Is a Less Pro-cyclical Financial System an Achievable Goal?’, Charles Goodhart, National Institute Economic Review, 211 (1), 2010, R17–R26PART V: THE STRUCTURAL ORGANISATION OF SUPERVISION 19. ‘The Organizational Structure of Banking Supervision’, C.A.E. Goodhart, Economic Notes, 31 (1), 2002, 1–41, 43, 45–6 20. ‘The Skill Profile of Central Bankers and Supervisors’, (Charles Goodhart, Dirk Schoenmaker and Paolo Dasgupta, European Finance Review, 6, 2002, 397–42721. ‘The Changing Role of Central Banks’, C.A.E. Goodhart, BIS Working Paper 326, 2010, 1–16PART VI: CONCLUSION 22. ConclusionCharles A.E. Goodhart and Dimitrios P. Tsomocos

'Overall, I find Financial Stability in Practice: Towards an Uncertain Future by Goodhart and Tsomocos very useful in understanding how the financial sector works, why it should be regulated and how it can be regulated to achieve the main goal of financial stability.'