Corporate governance of banks and financial stability

Luc Laeven, Lev Ratnovski, 21 July 2014

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Corporate governance is the practice of shareholders exercising control over managers so that they act in shareholders’ interests. In non-financial firms, this maximises firm efficiency. Such efficiency effects also exist in banks. For example, banks that face more active takeover markets are more cost-efficient (Brook et al. 1998).

Topics: Financial markets
Tags: bank regulation, corporate governance, systemic risk

Are banks too large?

Lev Ratnovski, Luc Laeven, Hui Tong, 31 May 2014

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Large banks have grown significantly in size and become more involved in market-based activities since the late 1990s. Figure 1 shows how the balance-sheet size of the world’s largest banks increased two- to four-fold in the ten years prior to the crisis. Figure 2 illustrates how banks shifted from traditional lending towards market-oriented activities.

Topics: Financial markets
Tags: bank capital, bank regulation, bank resolution, banking, BASEL III, economies of scale, regulation, systemic risk, Too big to fail

How to loosen the banks-sovereign nexus

Paolo Angelini, Giuseppe Grande, 8 April 2014

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Sovereign debtors and their national banking systems are closely linked through a range of direct and indirect channels.

Topics: EU institutions, Financial markets
Tags: bank capital, bank regulation, capital requirements, home bias

Estimating the impact of changes in aggregate bank capital requirements during an upswing

Joseph Noss, Priscilla Toffano, 6 April 2014

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The recent financial crisis and economic contraction that followed highlighted the crucial role that banks play in facilitating the extension of credit and enabling economic growth. This underlies the economic rationale for imposing regulations on the banking industry, including minimum capital requirements designed to mitigate risks banks would not otherwise account for in their behaviour.

Topics: Financial markets
Tags: bank capital, bank regulation, banking, banks, BASEL III, capital requirements, credit, Macroprudential policy, regulations

Have we solved 'too big to fail'?

Andrew G Haldane, 17 January 2013

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No.

Topics: Financial markets
Tags: bank regulation, Too big to fail

Bank governance and regulation

Luc Laeven, 25 October 2011

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Regulations for banks are being rewritten in response to the global financial crisis. The Basel III framework is being adopted, capital requirements are being increased, and safety nets have expanded in scope and size, all with the aim of making banks safer.

Topics: Financial markets, International finance
Tags: bank governance, bank regulation, banking, principal-agent problem

Do not be detoured by bankers and their friends; our future financial salvation lies in the direction of Basel

Avinash Persaud, 23 September 2011

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For the past decade I have been a trenchant critic of the international banking rules developed in Basel. Nine years ago, I wrote an editorial in The Financial Times1 highlighting the perverse irony of bankers capturing their regulators and yet fashioning international banking regulation in a way that would lead them to systemic collapse.

Topics: Financial markets, International finance
Tags: bank regulation, BASEL III, global crisis

Tax banks to discourage systemic-risk creation, not to fund bailouts

Enrico Perotti, 7 February 2010

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The burning issue of funding the bailout has finally led to the first policy action on financial taxation. The good news is that it is not a Tobin tax on all financial transactions, which would be a very crude and distortionary solution.

Topics: Financial markets
Tags: bank regulation, Obama's bank reforms, Pigouvian tax

Sudden financial arrest

Ricardo Caballero, 17 November 2009

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“Sudden cardiac arrest (SCA) is a condition in which the heart suddenly and unexpectedly stops beating. When this happens, blood stops flowing to the brain and other vital organs…. SCA usually causes death if it’s not treated within minutes….”
– US National Institute of Health

Topics: Financial markets
Tags: bank regulation, moral hazard, Sudden financial arrest

Liquidity risk charges as a macro-prudential tool

Enrico Perotti, Javier Suarez, 7 November 2009

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The recent financial crisis was unprecedented in scale and speed of propagation. The original housing shock was severely compounded by banks’ extreme funding fragility (Brunnermeier 2009). Banks’ risk-absorbing capacity had been reduced not just by lower capital buffers but also by extremely short-term funding.

Topics: Financial markets, Macroeconomic policy
Tags: bank regulation, Liquidity risk charges, macro-prudential regulation

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