The interplay of sovereign spreads and banks’ fragility in the Eurozone

Damiano Sandri, Ashoka Mody, 23 November 2011

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European policymakers are confronting a heightened crisis characterised by a perverse and seemingly intractable interplay between sovereign debt pressures and financial-sector fragilities (Wolff 2011). Three questions arise:

Topics: Financial markets, International finance
Tags: banks, eurozone, spreads

How much capital do European banks need? Some estimates

Viral Acharya, Dirk Schoenmaker, Sascha Steffen, 22 November 2011

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The European banking system is freezing up. Several banks are not able to fund themselves in the market. The lack of market confidence in European banks is fed by the ongoing uncertainty about Eurozone sovereign debt (as well as real estate) to which these banks are exposed.

Topics: Financial markets, International finance
Tags: banks, eurozone, recapitalisation, sovereign debt

If banks should act as utilities, why not treat them as such?

Charles A.E. Goodhart, 30 August 2011

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Nobody thinks that utility-operating companies – whether in transport, such as railways, in energy, such as electricity, or telephone or water – are too big to fail. If they lose enough money and go bust, then, if another company cannot be found to take over the franchise, the government steps in to take over the operations.

Topics: Global crisis, International finance
Tags: banks, financial regulation

Capital, politics and bank weaknesses

Jon Danielsson, 27 June 2011

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Bank capital has emerged as a key element in the post-crisis financial regulatory reforms. Basel III is now likely to include a 7% equity-to-risk-weighted-assets capital requirement.

Topics: Financial markets
Tags: banks, capital requirements

Do banks learn from crises?

Ruediger Fahlenbrach, Robert Prilmeier, René M Stulz, 27 May 2011

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On 17 August 1998, Russia defaulted on its debt. This event started a dramatic chain reaction. As one observer put it, “the entire global economic system as we know it almost went into meltdown, beginning with Russia's default” (Friedman 1999). As Russia defaulted, a number of investors, including banks, made large losses.

Topics: Global crisis, International trade
Tags: banks, financial crises, risk-taking, Russia

From financial crisis to Great Recession: Evidence on the transmission role of banks

Shekhar Aiyar, 12 May 2011

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How did problems originating in one asset class in one country propagate internationally, sparking the Great Recession? A standard stylised explanation relies on the globalisation of the banking system, and has two parts.

Topics: Financial markets, Global crisis, International finance
Tags: banks, global crisis, Great Recession

Optimal Bank Capital

David Miles, Gilberto Marcheggiano, Jing Yang, 11 April 2011

Vox users can download CEPR Discussion Paper 8333 for free here.

Journalists are entitled to free DP downloads on request; please contact pressoffice@cepr.org. To learn more about subscribing to CEPR's Discussion Paper Series, please visit the CEPR website.

URL: www.cepr.org/DP8333
Topics: Financial markets, Global economy, International finance
Tags: banks, capital regulation, capital structure, cost of equity, leverage and Modigliani-Miller

Do we need big banks?

Harry Huizinga, Asli Demirgüç-Kunt, 18 March 2011

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In recent years, many banks have reached enormous size both in absolute terms and relative to their national economies. By 2008:

Topics: Financial markets, Global crisis, International finance
Tags: bank size, banks, financial regulation, systemic risk

Banks and capital markets: A two-way nexus

Biagio Bossone, 18 December 2010

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Financial regulation is being rethought. One area where the conventional wisdom is being redrawn is the interaction of banks and capital markets. For years, banks and capital markets have been viewed as competing sources of financing (e.g. Jacklin 1987, Jacklin and Bhattacharya 1988, Diamond 1997, and Allen and Gale 1999 and 2002).

Topics: International finance
Tags: banks, capital markets, financial regulation

Banks and capital markets as a coevolving financial system

Fenghua Song, Anjan Thakor, 1 December 2010

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At a time when financial regulation is being fundamentally rethought, the optimal configuration of banks and capital markets within a financial system and how each should be regulated have become centre-stage issue. Banks and capital markets are often viewed as competing sources of financing (e.g. Allen and Gale 1997, Boot and Thakor 1997, and Dewatripont and Maskin 1995).

Topics: Financial markets
Tags: banks, capital markets, financial regulation

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