RBA's Edey: regulation determined risk taking
Financial regulation unintentionally shaped the excessive risk-taking that occurred in the run up to the credit crisis, said Malcolm Edey, the assistant governor of the Reserve Bank of Australia.
Edey said that in the case of capital regulations, banks had responded to the incentives to economise on capital by shifting more and more of their activities into off-balance-sheet vehicles. He said that a set of regulations intended to contain a certain type of risk, had therefore actually had the
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