Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:


Intelligent transaction tax could help reduce systemic risk in financial networks


A new study proposes a solution for mitigating the increasingly risky nature of financial markets, based on an analysis of systemic risk in financial networks.

A tax on individual transactions between financial institutions—based on the level of systemic risk that each transaction adds to the system—could essentially eliminate the risk of future collapse of the financial system, according to a new study recently published in the journal Quantitative Finance. It relies on an analysis of the networks of the banking system, using central bank data from Austria.

“When banks collapse, it costs a lot to bail them out, and that money usually comes from the public, from taxpayers” explains IIASA researcher Stefan Thurner, who coauthored the study with IIASA researcher Sebastian Poledna. The proposed tax would go into a government fund which could be used to bail out a struggling bank, for example. “You could also consider it a form of systemic risk insurance,” says Thurner.

Financial institutions are linked by multiple types of transactions, which Thurner and Poledna have modeled in a detailed network analysis. These transactions include deposits and loans between financial institutions. The study is the first to quantify the systemic risk that individual transactions add to the system.

‘’Since the international financial crisis in 2007 and 2008, policymakers have been discussing new ways to regulate the system in order to help avoid a repeat scenario.

The new study provides just that,” says Poledna. While introducing such a tax would require some work, the researchers argue that the data are there and the technical effort required for implementation is not overwhelming. Thurner has already presented the work to interested policymakers, supervisors, and central banks in the EU and Mexico.

“There’s currently a lot of discussion about a Tobin tax in the European Union, but the version they are proposing would tax every transaction at a flat rate. The tax we are proposing would not have to be large, in order to act as an incentive scheme for avoiding transactions that would be the most harmful for the system—banks would try to avoid transactions that generate that risk,” says Thurner.

Poledna S, Thurner S (2016). Elimination of systemic risk in financial networks by means of a systemic risk transaction tax. Quantitative Finance doi:10.1080/14697688.2016.1156146

Weitere Informationen:

MSc Katherine Leitzell | idw - Informationsdienst Wissenschaft

More articles from Business and Finance:

nachricht RWI/ISL-Container Throughput Index with minor decline on a high overall level
20.03.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

nachricht The RWI/ISL-Container Throughput Index started off well in 2018
22.02.2018 | RWI – Leibniz-Institut für Wirtschaftsforschung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Space observation with radar to secure Germany's space infrastructure

Satellites in near-Earth orbit are at risk due to the steady increase in space debris. But their mission in the areas of telecommunications, navigation or weather forecasts is essential for society. Fraunhofer FHR therefore develops radar-based systems which allow the detection, tracking and cataloging of even the smallest particles of debris. Satellite operators who have access to our data are in a better position to plan evasive maneuvers and prevent destructive collisions. From April, 25-29 2018, Fraunhofer FHR and its partners will exhibit the complementary radar systems TIRA and GESTRA as well as the latest radar techniques for space observation across three stands at the ILA Berlin.

The "traffic situation" in space is very tense: the Earth is currently being orbited not only by countless satellites but also by a large volume of space...

Im Focus: Researchers Discover New Anti-Cancer Protein

An international team of researchers has discovered a new anti-cancer protein. The protein, called LHPP, prevents the uncontrolled proliferation of cancer cells in the liver. The researchers led by Prof. Michael N. Hall from the Biozentrum, University of Basel, report in “Nature” that LHPP can also serve as a biomarker for the diagnosis and prognosis of liver cancer.

The incidence of liver cancer, also known as hepatocellular carcinoma, is steadily increasing. In the last twenty years, the number of cases has almost doubled...

Im Focus: Researchers at Fraunhofer monitor re-entry of Chinese space station Tiangong-1

In just a few weeks from now, the Chinese space station Tiangong-1 will re-enter the Earth's atmosphere where it will to a large extent burn up. It is possible that some debris will reach the Earth's surface. Tiangong-1 is orbiting the Earth uncontrolled at a speed of approx. 29,000 km/h.Currently the prognosis relating to the time of impact currently lies within a window of several days. The scientists at Fraunhofer FHR have already been monitoring Tiangong-1 for a number of weeks with their TIRA system, one of the most powerful space observation radars in the world, with a view to supporting the German Space Situational Awareness Center and the ESA with their re-entry forecasts.

Following the loss of radio contact with Tiangong-1 in 2016 and due to the low orbital height, it is now inevitable that the Chinese space station will...

Im Focus: Alliance „OLED Licht Forum“ – Key partner for OLED lighting solutions

Fraunhofer Institute for Organic Electronics, Electron Beam and Plasma Technology FEP, provider of research and development services for OLED lighting solutions, announces the founding of the “OLED Licht Forum” and presents latest OLED design and lighting solutions during light+building, from March 18th – 23rd, 2018 in Frankfurt a.M./Germany, at booth no. F91 in Hall 4.0.

They are united in their passion for OLED (organic light emitting diodes) lighting with all of its unique facets and application possibilities. Thus experts in...

Im Focus: Mars' oceans formed early, possibly aided by massive volcanic eruptions

Oceans formed before Tharsis and evolved together, shaping climate history of Mars

A new scenario seeking to explain how Mars' putative oceans came and went over the last 4 billion years implies that the oceans formed several hundred million...

All Focus news of the innovation-report >>>



Industry & Economy
Event News

New solar solutions for sustainable buildings and cities

23.03.2018 | Event News

Virtual reality conference comes to Reutlingen

19.03.2018 | Event News

Ultrafast Wireless and Chip Design at the DATE Conference in Dresden

16.03.2018 | Event News

Latest News

For graphite pellets, just add elbow grease

23.03.2018 | Materials Sciences

Unique communication strategy discovered in stem cell pathway controlling plant growth

23.03.2018 | Agricultural and Forestry Science

Sharpening the X-ray view of the nanocosm

23.03.2018 | Physics and Astronomy

Science & Research
Overview of more VideoLinks >>>