Exploring the transmission channels of contagious bank runs

Martin Brown, Stefan Trautmann, Razvan Vlahu, 10 April 2014

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Financial contagion – the situation in which liquidity or insolvency risk is transmitted from one financial institution to another – is viewed by policymakers and academics as a key source of systemic risk in the banking sector.

Topics: Financial markets
Tags: bank runs, banking, banks, contagion, experimental economics, financial crisis, financial stability, global crisis, systemic risk

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

The puzzling pervasiveness of dysfunctional banking

Charles W Calomiris interviewed by Romesh Vaitilingam, 21 Mar 2014

Charles Calomiris talks to Romesh Vaitilingam about his recent book, co-authored with Stephen Haber, ‘Fragile by Design: The Political Origins of Banking Crises and Scarce Credit’. They discuss how politics inevitably intrudes into bank regulation and why banking systems are unstable in some countries but not in others. Calomiris also presents his analysis of the political and banking history of the UK and how the well-being of banking systems depends on complex bargains and coalitions between politicians, bankers and other stakeholders. The interview was recorded in London in February 2014.

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See Also

Calomiris, C W and S H Haber (2014), Fragile by Design: The Political Origins of Banking Crises and Scarce Credit, Princeton University Press.

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Topics: Financial markets
Tags: bank capital, Bank credit, banking, banks, credit booms, Eurozone crisis, recapitalisation, systemic risk

How much is enough? The case of the Resolution Fund in Europe

Thomas Huertas, María J Nieto, 18 March 2014

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During the crisis, individual institutions such as Hypo Real Estate required public assistance of €100 billion or more.1 So how can a European Resolution Fund of only €55 billion possibly suffice for all banks in the Eurozone?

Topics: EU institutions, Financial markets, International finance
Tags: bail-in, bank resolution, banking, European Resolution Fund, eurozone, Macroprudential policy, microprudential regulation, regulation, systemic risk

Who is to blame for the credit crunch: foreign ownership or foreign funding?

Erik Feyen, Raquel Letelier, Inessa Love, Samuel Munzele Maimbo, Roberto Rocha, 15 March 2014

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From boom to crunch

Although most developing countries around the world experienced a severe contraction of bank credit during the recent global financial crisis, the Eastern Europe and Central Asia (ECA) region was disproportionately hit after it had experienced very high credit growth (Figure 1).

Figure 1. Banking system trends in ECA

Topics: Financial markets, Global crisis, International finance
Tags: banking, Central Asia, Credit crunch, credit growth, cross-border banking, Eastern Europe, global financial crisis

The AQR and stress testing the European banking system

Viral Acharya interviewed by Viv Davies, 14 Mar 2014

Viral Acharya talks to Viv Davies about his recent work with Sascha Steffen that, using publicly available data and a series of shortfall measures, estimates the capital shortfalls of EZ banks that will be stress-tested under the proposed Asset Quality Review. They also discuss the difference in accounting rules between US and EZ banks and the future potential for banking union in the Eurozone. The interview was recorded by phone on 25 February 2014.

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See Also

Acharya, V and S Steffen (2014) "Falling short of expectations? Stress-testing the European banking system", VoxEU.org, 17 January.

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Topics: Financial markets
Tags: Asset Quality Review, bank capital, banking, banking union, banks, Eurozone crisis, recapitalisation, stress testing, systemic risk

Recent studies reinforce the case for the Liquidity Coverage Ratio

Stefan W Schmitz, Heiko Hesse, 28 February 2014

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With the underpricing of liquidity risk prior to the crisis, a return to the same pre-crisis liquidity pattern is not expected. There is widespread consensus that banks’ extensive pre-crisis reliance on deep and broad unsecured money markets is to be avoided in the future (see e.g. IMF 2013).

Topics: EU institutions, Financial markets
Tags: banking, liquidity

Falling short of expectations? Stress-testing the European banking system

Viral Acharya, Sascha Steffen, 17 January 2014

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The Eurozone is mired in a recession. In 2013, the GDP of the 17 Eurozone countries fell by an average of 0.5%, and the outlook for 2014 shows considerable risks across the region. To stabilise the common currency area and its (partly insolvent) financial system, a Eurozone banking union is being established.

Topics: Financial markets
Tags: Asset Quality Review, bank capital, banking, banking union, banks, Eurozone crisis, recapitalisation, stress testing, systemic risk

Why fiscal sustainability matters

Willem Buiter, 10 January 2014

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Does fiscal sustainability matter only when there is a fiscal house on fire, as was the case with the Greek sovereign insolvency in 2011–12? Far from it.

Topics: Financial markets, Global crisis, International finance, Macroeconomic policy
Tags: balance-sheet recession, banking, banking union, banks, capital flows, credit booms, Currency wars, emerging markets, eurozone, Eurozone crisis, financial crisis, fiscal policy, fiscal sustainability, global financial crisis, sovereign debt, sovereign debt restructuring

Gambling for resurrection in Iceland

Friðrik Már Baldursson, Richard Portes, 6 January 2014

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The demise of the three large Icelandic banks, just after the fall of Lehman Brothers, was a key event in the spread of the financial crisis. A couple of weeks before its collapse in October 2008, Kaupthing bank announced that the Qatari investor Sheikh Mohammed Bin Khalifa Bin Hamad al-Thani had bought a 5.01% stake. This briefly boosted market confidence in Kaupthing (Financial Times 2008).

Topics: Financial markets
Tags: banking, banks, financial crisis, gambling for resurrection, Iceland, moral hazard

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