A financial institution’s asset size should not be the primary determinant of systemic risk, notes independent research released by The Property Casualty Insurers Association of America (PCI). PCI cautions that such a measurement can have major negative economic consequences, cost jobs and increase systemic risk if used in financial services reform legislation.
Release of the study, “Problems With Reliance On Firm Size For Systemic Risk Determination,” from NERA Economic Consulting, comes as the Senate considers sweeping financial services regulatory reform measures. In December 2009, the U.S. House of Representatives passed its version of financial services regulatory reform, H.R. 4173. Both bills use size alone for financial institutions as a threshold for determining who pays for proposed systemic risk assessments.
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