To ensure the financial stability of the economy, is it more effective to introduce stricter regulations for investment banks, commercial banks and other financial institutions, or to create rescue mechanisms financed by the banking sector?

Dear Researchers, Scientists, Friends,

Financial stability is crucial for the proper functioning of the economy. Financial crises such as the one in 2008 have highlighted the need to strengthen the financial system. The two main approaches are to tighten regulations for commercial banks to prevent excessive risk and to create bailout funds financed by the banks themselves that can be used in crisis situations. For the purposes of this discussion, I have formulated the following research thesis: stricter regulations for commercial banks reduce the likelihood of financial crises, but can limit the availability of credit and hinder economic growth. On the other hand, bailouts financed by the banking sector ensure a quick response in crisis situations, but can lead to moral hazard, where banks take excessive risks, hoping for support in case of problems. Therefore, the analysis should take into account the impact of stricter regulations on financial stability and on the lending activities of banks and their ability to finance the economy. It is also crucial to examine the extent to which regulations affect the level of innovation in the financial sector and the competitiveness of banks in international markets. In the case of rescue mechanisms financed by the banking sector, it is important to analyse their effectiveness in mitigating the effects of possible financial crises and their impact on the risky behaviour of financial institutions. An important aspect is also the assessment of the costs of such mechanisms for the banking sector and the ways in which they are financed (e.g. through bank contributions). In addition, the potential social effects of both approaches should be considered, including the impact on savers, investors and taxpayers. The study should also take into account the experiences of different countries in implementing stricter regulations (e.g. Basel III) and creating rescue funds (e.g. Single Resolution Fund in the EU) in order to draw conclusions about the effectiveness of both strategies.

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I invite you to scientific cooperation,

Dariusz Prokopowicz