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- Publisher Website: 10.1017/lsi.2024.8
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Article: Don’t Call It a Failure: Systemic Risk Governance for Complex Financial Systems
Title | Don’t Call It a Failure: Systemic Risk Governance for Complex Financial Systems |
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Authors | |
Issue Date | 5-Mar-2024 |
Publisher | Cambridge University Press |
Citation | Law & Social Inquiry, 2024, p. 1-42 How to Cite? |
Abstract | The probability that an event will avalanche into an impairment of essential services constitutes a “systemic risk.” Owing to the inherent complexities of modern societies, the outbreak of a novel disease or the failure of a financial institution can rapidly escalate into an impact significantly larger than the initial event. Through the lens of complex system theory, this article draws a parallel between financial crises and disasters to contend that the regulatory framework for financial systemic risk is unequipped to address its fundamental dynamics. Epitomized by the market failure rationale, financial regulation is premised on a reductionist view that purports both systemic risk and law as external to the actions of market participants. Conversely, this article advances a twofold conceptual framework. First, it shows that systemic risk emerges from the same complex dynamics that generate the financial system. Second, it understands law as an agent of complexity, thus contributing to the emergence of finance and its inherent instability. Normatively, this conceptual framework reveals the limits of current regulatory approaches and constructs a holistic risk governance framework that is akin to the one adopted to govern disaster risks. |
Persistent Identifier | http://hdl.handle.net/10722/345879 |
ISSN | 2023 Impact Factor: 1.4 2023 SCImago Journal Rankings: 0.534 |
DC Field | Value | Language |
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dc.contributor.author | Castellano, Giuliano G | - |
dc.date.accessioned | 2024-09-04T07:06:12Z | - |
dc.date.available | 2024-09-04T07:06:12Z | - |
dc.date.issued | 2024-03-05 | - |
dc.identifier.citation | Law & Social Inquiry, 2024, p. 1-42 | - |
dc.identifier.issn | 0897-6546 | - |
dc.identifier.uri | http://hdl.handle.net/10722/345879 | - |
dc.description.abstract | The probability that an event will avalanche into an impairment of essential services constitutes a “systemic risk.” Owing to the inherent complexities of modern societies, the outbreak of a novel disease or the failure of a financial institution can rapidly escalate into an impact significantly larger than the initial event. Through the lens of complex system theory, this article draws a parallel between financial crises and disasters to contend that the regulatory framework for financial systemic risk is unequipped to address its fundamental dynamics. Epitomized by the market failure rationale, financial regulation is premised on a reductionist view that purports both systemic risk and law as external to the actions of market participants. Conversely, this article advances a twofold conceptual framework. First, it shows that systemic risk emerges from the same complex dynamics that generate the financial system. Second, it understands law as an agent of complexity, thus contributing to the emergence of finance and its inherent instability. Normatively, this conceptual framework reveals the limits of current regulatory approaches and constructs a holistic risk governance framework that is akin to the one adopted to govern disaster risks. | - |
dc.language | eng | - |
dc.publisher | Cambridge University Press | - |
dc.relation.ispartof | Law & Social Inquiry | - |
dc.rights | This work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License. | - |
dc.title | Don’t Call It a Failure: Systemic Risk Governance for Complex Financial Systems | - |
dc.type | Article | - |
dc.identifier.doi | 10.1017/lsi.2024.8 | - |
dc.identifier.scopus | eid_2-s2.0-85186899700 | - |
dc.identifier.spage | 1 | - |
dc.identifier.epage | 42 | - |
dc.identifier.eissn | 1747-4469 | - |
dc.identifier.issnl | 0897-6546 | - |