Financial fragility and securitisation: the discussions with Australian regulators and bank risk managers

Abstract

Among divergent approaches to understand the global financial crisis, Minsky's Financial Instability Hypothesis has gained increased attention. In part, the chapter draws upon Minsky's notion that the seeds of instability are sown when banks, households, and firms move from hedge to speculative and then into Ponzi financial positions. Financial innovations such as securitisation contribute to this transformation. In addition, the paper will discuss the findings arising from an analysis of interviews that focus on securitisation related issues after the sub-prime crisis with practitioners who were closely involved in regulation and risk-management. The paper highlights the need for fundamental reform in the financial sector with a more consistent regulatory platform and enhanced supervision, to facilitate rapid healing from the damage arising from the financial crisis in Australia.

Citation

Li, S. (2010), "Financial fragility and securitisation: the discussions with Australian regulators and bank risk managers", Kim, S.-J. and Mckenzie, M.D. (Ed.) International Banking in the New Era: Post-Crisis Challenges and Opportunities (International Finance Review, Vol. 11), Emerald Group Publishing Limited, Leeds, pp. 255-269. https://doi.org/10.1108/S1569-3767(2010)0000011012