Global Collaboration on
Financial System Stability
Started in 2007, our Global Collaboration brings together academics, financial regulators, banks and investors to develop new understandings of scientific, economic and regulatory approaches to improving financial system resilience. The Collaboration facilitates productive interactions among the investment, regulatory and academic communities with the principal aim of reducing the risks of financial crises and promoting long-term productivity in the real economy.
Businesses may apply to join the steering group. The principal benefits are:
Deeper, more collaborative relationships between market participants and Regulators.
Simpler, more effective and less costly Systemic Regulation with fewer unintended consequences and a better long-term focus
Deeper understanding of the practical interactions between regulatory actions and markets
This is an outstanding opportunity for leading players in investment and risk management to collaborate to achieve lasting business benefits, both for the participants and for the global financial system and society as a whole.
Phase 1: 2007-2011
The main output of the first phase drew attention to the “Regulators’ Dilemma”: that minimising individual risk is not the same as minimising systemic risk, and advocating diverse diversification. The flagship output from Phase 1 was the publication of 'Individual versus systemic risk and the Regulator's Dilemma' in Proceedings of the National Academy of Sciences of the USA (PNAS) in 2011. This has since been cited around 20 times per year, including by 2 Nobel Prize Laureates (Joseph Stiglitz and Elinor Ostrom).
Phase 2: 2015-2018
The second phase is focusing on how the prices of assets can be distorted when investors either lack confidence in, or are uninterested in, an asset’s real value, and how dramatic price movements in one asset can propagate more widely. This involves a higher level of constructive engagement with the Bank of England/PRA, the FCA, the HKMA and other regulatory bodies in order to look at appropriate responses to changing investment styles.
Our current focus is on the UK, China (including Hong Kong) and the USA. Chinese engagement is particularly important given that economy’s vital impact on the global financial system and increasing role in the emerging global financial architecture.
The Business Team consists of several large and well-respected financial institutions that provide the project with guidance, practical insights and funding.
The Academic Panel includes a Nobel Prizewinning Economist ( Prof Mike Spence [NYU] ) and other outstanding scientists in the UK, the US and China, including Prof Robert MacKay FRS [Warwick] and Prof Zhao Xijun [Renmin].
Coordination is provided by Sciteb, where day-to-day research is undertaken in collaboration with colleagues at the University of Warwick and elsewhere. Interesting results are emerging and we are currently preparing a contribution to the planned FCA/SEC conference in 2019 on “Who pays for efficient markets?”
Relevant publications that have cited our work include:
‘The price of complexity in financial networks’, S Battiston, G Caldarelli, RM May, T Roukny, JM Stiglitz. PNAS 2016
‘Stability analysis of financial contagion due to overlapping portfolios’, F Caccioli, M Shrestha, C Moore, JD Farmer. J. Banking & Finance 2014
‘Globally networked risks and how to respond’, D Helbing. Nature 2013
‘Aligning key concepts for global change policy: robustness, resilience, and sustainability’, JM Anderies, C Folke, B Walker, E Ostrom. Ecology & Society 2013
‘S&P and the 'Regulator's Dilemma'’, Wall Street Journal, 12 August 2011
‘Individual versus systemic risk and the Regulator's Dilemma’, Nicholas Beale, David G. Rand, Heather Battey, Karen Croxson, Robert M. May and Martin A. Nowak, PNAS, 18 July 2011
‘Bank official calls on biology lessons’, Clive Cookson, Financial Times, 19 January 2011
‘The $100 Billion Question’ (PDF, 100K), Andrew G. Haldane, speech given at Institute of Regulation & Risk, Hong Kong, 30 March 2010
‘Back to Nature’, Vanessa Drucker, Fund Strategy, 22 March 2010
‘Global crisis and national policy responses: together alone?’ (PDF, 628K), Jorge Braga de Macedo, Lisbon Academy of Science (ACL) (revised 21 March 2010)
‘Organic Mechanics’, Clive Cookson, Gillian Tett and Chris Cook, Financial Times, 26 November 2009
‘Banking On The State’ (PDF, 204K), Piergiorgio Alessandri and Andrew G. Haldane, Bank of England, November 2009
‘Systemic risk: the dynamics of model banking systems’, Robert M. May and Nimalan Arinaminpathy, Interface, 1 October 2009