The impact of corporate governance in financial institutions

Hamid Mehran, Alan Morrison, Joel Shapiro 06 April 2012

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A recent op-ed by former Goldman Sachs employee Greg Smith has led to an outcry over Goldman Sachs’ perceived mistreatment of their customers. This illustrates two important themes in the financial sector, both of which came to the fore during the crisis, ie corporate culture and incentives. Obviously, neither regulation nor market forces has put either of these issues to rest. In this column, we look at both through the lens of corporate governance and we highlight the contribution of recent research to these topics.

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Topics:  Financial markets

Tags:  corporate governance, banks, too-big-to-fail

Getting ready for Vickers

Roger Alford 12 September 2011

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The proposal that each of Britain’s large universal banks should be separated into a deposit bank and an investment bank arose from the crisis of October 2008. At the time, two of these banks – Royal Bank of Scotland and Lloyds TSB – faced failure and public money was thrown in to save them.

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Topics:  International finance

Tags:  UK, financial regulation, too-big-to-fail

A proposal to reform the US mortgage finance

Viral Acharya, Matthew Richardson, Stijn Van Nieuwerburgh, Lawrence J. White 12 May 2011

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The goal of reforming housing finance should be to ensure economic efficiency, both in the primary mortgage market (origination) as well as in the secondary mortgage market (securitisation). By economic efficiency, we have in mind a housing finance system that:

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Topics:  Financial markets Global crisis

Tags:  US, global crisis, housing market, too-big-to-fail, US housing finance, sub-prime

A race to the bottom: Understanding the US housing boom

Viral Acharya, Matthew Richardson, Stijn Van Nieuwerburgh, Lawrence J. White 11 May 2011

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Earlier this year the US Financial Crisis Inquiry Commission released its report. With no small amount of irony, a crisis emerged in its inquiry. The majority of the commissioners attributed the credit boom and bust to greedy but incompetent bankers and lazy but ideological regulators. The dissenting commissioners, meanwhile, focused more on poorly designed housing subsidies. Yet while the two groups reached largely polarised views, consensus should have in fact been easy to reach.

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Topics:  Financial markets Global crisis

Tags:  US, Fannie Mae, Freddie Mac, global crisis, too-big-to-fail, housing finance

Some progress in the banking reform debate

Nicolas Véron 26 April 2011

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The Independent Commission on Banking, set up last year by the newly elected UK government and chaired by Oxford economist John Vickers, published its much awaited interim report on reform options for British banking on 11 April (ICB 2011). The policy proposals, to be confirmed in a final report in September, are a significant milestone not only for the UK, but beyond it for European and global banking reform.

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Topics:  Financial markets Global crisis Global governance International finance

Tags:  financial regulation, too-big-to-fail, Independent Commission on Banking, Volcker rule

The European Union should start a debate on too-big-to-fail

Morris Goldstein, Nicolas Véron 14 April 2011

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The existence of too-big-to-fail financial institutions represents a three-fold policy challenge.

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Topics:  Financial markets Global crisis

Tags:  financial regulation, too-big-to-fail

Safety-net benefits conferred on difficult-to-fail-and-unwind banks in the US and EU before and during the great recession: A summary

Santiago Carbó-Valverde, Edward J Kane, Francisco Rodríguez Fernández 22 March 2011

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Accounting standards for recognising losses make it hard to detect if a bank is going under. The signs of a bank’s insolvency are slow to surface. During the housing and securitisation bubbles that preceded the 2007-2008 financial meltdown, top managers and regulators of US and EU financial institutions claimed that there was no way they could see the build-up of crisis pressures.

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Topics:  Financial markets Global crisis International finance

Tags:  financial regulation, systemic risk, too-big-to-fail

A Safer World Financial System: Improving the Resolution of Systemic Institutions

Stijn Claessens, Richard J. Herring, Dirk Schoenmaker,

Date Published

Thu, 07/08/2010

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http://www.cepr.org/pubs/books/cepr/booklist.asp?cvno=P210

The report is available to purchase through the CEPR website.

Tags
financial regulation, global crisis, too-big-to-fail

A safer world financial system: Improving the resolution of systemic institutions

Stijn Claessens, Richard J. Herring, Dirk Schoenmaker 08 July 2010

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Financial reform legislation is finally being put in place in the US and EU in response to the 2007-2009 global financial crisis. Much is riding on these reforms: fostering more robust yet profitable financial systems, preventing a repeat of the biggest crisis since the Great Depression, and supporting efficient financial intermediation that helps economies grow. A crucial dimension of the reforms is how to deal with large cross-border financial institutions when they run into trouble.

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Topics:  Financial markets International finance

Tags:  financial regulation, global crisis, too-big-to-fail

Bank ownership and stability: Evidence from Germany

Thorsten Beck, Heiko Hesse, Thomas Kick, Natalja von Westernhagen 09 May 2009

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Since the onset of the financial crisis, bank stability has been at the top of policy makers’ agenda across advanced and developing countries (IMF, 2007). Bank stability, however, seems related in part to size and ownership structures. Some analysts point to the failure of private banks as evidence of the fragility of short-term and profit-oriented banking. Others point to governance failures and distorted business models in state-owned banks that came to light during the crisis, in Germany and elsewhere.

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Topics:  Financial markets

Tags:  Germany, banks, too-big-to-fail, banking stability, Bank stability