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Article: Don’t Call It a Failure: Systemic Risk Governance for Complex Financial Systems

TitleDon’t Call It a Failure: Systemic Risk Governance for Complex Financial Systems
Authors
Issue Date5-Mar-2024
PublisherCambridge University Press
Citation
Law & Social Inquiry, 2024, p. 1-42 How to Cite?
AbstractThe 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 Identifierhttp://hdl.handle.net/10722/345879
ISSN
2023 Impact Factor: 1.4
2023 SCImago Journal Rankings: 0.534

 

DC FieldValueLanguage
dc.contributor.authorCastellano, Giuliano G-
dc.date.accessioned2024-09-04T07:06:12Z-
dc.date.available2024-09-04T07:06:12Z-
dc.date.issued2024-03-05-
dc.identifier.citationLaw & Social Inquiry, 2024, p. 1-42-
dc.identifier.issn0897-6546-
dc.identifier.urihttp://hdl.handle.net/10722/345879-
dc.description.abstractThe 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.languageeng-
dc.publisherCambridge University Press-
dc.relation.ispartofLaw & Social Inquiry-
dc.rightsThis work is licensed under a Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.-
dc.titleDon’t Call It a Failure: Systemic Risk Governance for Complex Financial Systems-
dc.typeArticle-
dc.identifier.doi10.1017/lsi.2024.8-
dc.identifier.scopuseid_2-s2.0-85186899700-
dc.identifier.spage1-
dc.identifier.epage42-
dc.identifier.eissn1747-4469-
dc.identifier.issnl0897-6546-

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