ABSTRACT
This chapter discusses an interpretation of H. P. Minsky's approach to the role that financial regulation, and his observations have been updated to take into account the evolution of the financial structure that has occurred since his death. Minsky made a proposal in the 1980s to limit the expansion of banks' assets. Minimum capital requirements should be changed to ensure that the desired rate of output growth is reached, so the desired output growth rate and the return on banks' assets should determine the minimum capital requirements. The proposals for changes in financial regulation discuss mainly the design of financial systems and the type of prudential regulation that should be introduced with the bulk of discussions concerning capital regulation versus other types of prudential regulations. Minsky made a proposal in the 1980s to limit the expansion of banks' assets. He foresaw a 'financial catastrophe' and the 'periodic need to bail out financial institutions'.
