Financial stability regimes adopted in the EU and the US after the global financial crisis : a comparison of the regimes and an analysis of their preparedness for the next financial crisis

Abstract

This dissertation aims to analyse the issue of systemic risk and the macroprudential supervisory entities setup in the EU and US after the global financial crisis. To reach this aim, research is carried out on the different elements of the European Systemic Risk Board and Financial Stability Oversight Council, such as governance, accountability, functions and powers which policymakers have provided for the entities through legislation. The developments undertaken over the years on the two macroprudential supervisory entities are also researched in order to better understand the amendments carried out over the years. Through the research gathered, a comparative analysis will be undertaken on the features of the European Systemic Risk Board and the Financial Stability Oversight Council to determine the differences and similarities of the two entities. This research is undertaken in order to answer the research question of which entity between the ESRB and the FSOC is better suited at mitigating systemic risks and the next financial crisis. The research question developed from the hypothesis that whilst initially the FSOC was given enhanced powers when compared with the ESRB, making it better suited at ensuring macroprudential supervision, over the years these powers have been watered down to the extent that the ESRB is now better suited at supervising entities and ensuring that systemic risk is mitigated. Therefore, by undertaking this research, an understanding is sought on how the amendments undertaken on the two entities in recent years have impacted their ability to reach the original objectives set for them as well as which entity is now better suited at mitigating systemic risk.