The Dodd-Frank Act, market-based measures of systemic risk and stress tests
Viral Acharya talks to Viv Davies about the Dodd-Frank Act and his recent work on capital requirements, market-based measures of systemic risk and stress tests. He highlights the new NYU Stern Systemic Risk Rankings of US financial institutions, which use the Marginal Expected Shortfall (MES) as its basis. Acharya discusses the shortcomings of the Basel III proposals and compares the recent European stress tests with those undertaken in the US. He highlights the importance of international coordination in the areas of derivatives, and agrees that financial reform compliance will require a cultural shift in the banking system.