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Abstract
The recent financial crisis has triggered a rethinking of the supervision and regulation of systemic connectedness. While there is a clear need to take a multipronged approach to systemic risk, and a flood of regulatory reform proposals has ensued, there is considerable uncertainty about how those proposals can be practically applied. Thus, this chapter aims to contribute to the debate on systemic-risk-based regulation in two ways. First, it presents a methodology to compute and smooth a systemic-risk-based capital surcharge. Second, it formally examines whether a mandate, by itself, to explicitly oversee systemic risk, as envisioned in some recent proposals, is likely to be successful in mitigating it.
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