Financial Intelligence
Governments stand ready to remake the US financial system, despite limited attention to "financial intelligence." Financial intelligence integrates key drivers of markets such as mechanics, inter-linkages, as well as the motivation of its participants with intelligence. Effective combination of finance and intelligence will meaningfully enhance the potential success of efforts to build a stronger and more stable financial system for the future.
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Derivative and Repo Markets
While derivatives and repo contracts have the potential to make the financial system more stable, they are often accused of doing exactly the opposite. How can the design, organization, legal context, and regulation of these markets be changed to allow derivatives and repo contracts to fulfill their potential rather than contribute to systemic risk?
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Bank Capital and Liquidity Rules
A central lesson of the recent crisis is that banks worldwide lacked sufficient, high quality capital to absorb large unexpected losses. Even well-capitalized banks found themselves at risk when market turmoil disrupted their traditional sources of funding. Officials and regulators have outlined a range of proposals to strengthen bank capital and liquidity. The CFS will evaluate many of these new proposals, in our own research and through expert discussions in the Policy Forum. The focus will be on whether the proposed changes are likely to reduce risks in the future, and the implications of these changes for the provision of financial services in the future.
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Regulating Large Financial Institutions
The recent crisis highlighted a new phenomenon: financial institutions that are deemed "too big, too systemically important or too complex to fail." These required massive official support at great public expense. Officials and regulators are committed to reining in these institutions through a range of actions. The CFS explores the diverse proposals for fundamental change in the supervision and permitted activities of systemically important financial institutions (SIFIs). Some proposals may alter the structure of the financial system itself, creating new challenges to tracking financial flows and to monitoring the future sources of risk in the system.
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Public Debt Expansion
Non-traditional monetary policies and outsized fiscal stimulus programs have brought about a substantial expansion of public debt. CFS strives to provide a clear understanding of its impact on economies and markets as well as identifying policies to minimize its undesirable effects.
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