Systematic Risk

By June it is expected that Obama Administration may propose legislation and call US Federal Reserve to play a central role in regulating Systematic Risk .As US banks stress tests are over and now administration is focusing on tighten the rules and regulations on the banks and financial institutions who were mainly responsible for the global recession in which number of banks becomes bankrupt that’s why Obama Administration propose a legal authority who will have a check over the banks moves and their strategies to avoid Systematic Risk to prevent crisis like this that is still ravaging the economies worldwide.

Systematic Risk refers to the problem in the financial system that is large enough to damage overall economy. As last year if the US government gave bail out packages to insurer American International Group because its failure like Lehman Brothers and Bank of America was seen as a Systematic Risk.

Obama administration also wants a agreement among officials that they will setup a government regulator to monitor and manage the Systematic Risk. Even Treasury Secretary Geithner believes that US needs a single regulator who will be responsible for regulating important firms and keep control on their critical payment and settlement systems.

Obama administration wants that this bill should become law within this year and the mistakes which resulted global meltdowns in future could be avoided and also president Barrack Obama would lead the effort on regulatory restructuring also.

It is expected that this move by the Obama administration could avoid Systematic risks in future or it can alarm the governments before coming slowdowns.

Hope this strategy will reduce risk for the economies of the world