A major new research programme looking at risk management and the regulation of financial institutions in light of the current financial crisis has been announced by the AXA Research Fund and the London School of Economics and Political Science (LSE) today.
Professor David Webb, Director of LSE's Financial Markets Group which will undertake the research, said: 'The current financial crisis has revealed a distance between our understanding of the interconnected behaviour of banks, the structure of the banking systems and layers of regulation. We aim to gain a better understanding of the weakness of the current financial architecture and to assess the scope for greater financial stability through governance and regulation.'
Eric Chaney, Chief Economist of the AXA Group said: 'While this research will focus on filling gaps in the academic understanding of these issues it will clearly also be extremely relevant to the development of knowledge informed policy.'
LSE academics undertaking the AXA Research Programme, will, for example, assess the performance of the global regulatory framework during the current crisis to analyse changes in regulation that could help reduce the risks of such crises in the future. They will look at the whole structure of capital standards, leverage ratios, accounting principles for bank assets and liquidity provision to the market. They will also examine the use of risk models and balance sheet information in managing risk at the level of intuitions, and for system-wide regulation.
Another strand of the research programme will scrutinise the governance of banks looking at board and ownership structure and how the top management are remunerated. This will aim to learn more about the skill-set and financial knowledge of non-executive directors, the board's function when seen in competition with banking regulation and ultimately its impact on bank performance.
High-powered incentive pay, the limited penalties when something goes wrong and the way this encourages excessive risk taking by financial institutions will also be examined.
To launch the research programme, a public panel discussion on the future of banking and financial regulation will take place at LSE on Monday 19 October. The panel will be Chief Economist of the AXA Group Eric Chaney, Dominique Carrel-Billiard, CEO of AXA Investment Managers and LSE Professors Charles Goodhart and David Webb. This event is free and open to all. For more information see the public lectures and events page.
13 October 2009