Technical Capabilities Necessary for Regulation of Systemic Financial Risk: Summary of a Workshop

National Research Council · Division on Engineering and Physical Sciences · Board on Mathematical Sciences and Their Applications

Jan. 2010 · National Academies Press

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The financial reform plans currently under discussion in the United States recognize the need for monitoring and regulating systemic risk in the financial sector. To inform those discussions, the National Research Council held a workshop on November 3, 2009, to identify the major technical challenges to building such a capability. The workshop, summarized in this volume, addressed the following key issues as they relate to systemic risk:

• What data and analytical tools are currently available to regulators to address this challenge?
• What further data-collection and data-analysis capabilities are needed?
• What specific resource needs are required to accomplish the task?
• What are the major technical challenges associated with systemic risk regulation?
• What are various options for building these capabilities?

Because every systemic event is unique with respect to its specific pathologyâ€"the various triggers and the propagation of effectsâ€"the workshop focused on the issues listed above for systemic risk in general rather than for any specific scenario. Thus, by design, the workshop explicitly addressed neither the causes of the current crisis nor policy options for reducing risk, and it attempted to steer clear of some policy issues altogether (such as how to allocate new supervisory responsibilities). More than 40 experts representing diverse perspectives participated in the workshop.