Europe must change course on banks

Nicolas Véron, 22 December 2011

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The Eurozone crisis keeps evolving along multiple dimensions. On the sovereign debt front, no deal is yet in sight on Greece’s debt restructuring, and Italy and Spain face major refinancing needs in early 2012.

Topics: EU policies, Europe's nations and regions, International finance
Tags: banks, Eurozone crisis, financial regulation

Deleveraging in the Eurozone

Vincent O'Sullivan, Stephen Kinsella, 17 December 2011

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The capital shortfall at EU banks is 8% higher than originally thought, according to the latest assessment from the European Banking Authority (EBA 2011) released on 8 December.

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

What is the value added of banks?

Christina Wang, 8 December 2011

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Like an organ of the human body, the financial system calls most attention to itself when it malfunctions. But in normal times, is the financial system like the human heart, circulating essential capital throughout the economy? Or is it like the appendix, doing little when healthy but devastating when ill?

Topics: International finance
Tags: banks, financial sector, financial system

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