Durable Financial Regulation: Monitoring Financial Instruments as a Counterpart to Regulating Financial Institutions

This paper sets forth a discussion framework for the information requirements of systemic financial regulation. It specifically describes a potential large macro-micro database for the United States based on an extended version of the Flow of Funds. I argue that such a database would have been of material value to U.S. regulators in ameliorating the recent financial crisis and could be of aid in understanding the potential vulnerabilities of an innovative financial system in the future. I also suggest that making these data available to the academic research community, under strict confidentiality restrictions, would enhance the detection and measurement of systemic risk.