Is there a future for international banks?

Dirk Schoenmaker 25 August 2013

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The international, centralised, business model of banks has come under pressure after the global financial crisis. Supervisors are leaving their traditional consolidated approach, under which a bank as a whole is assessed. Instead, they are moving towards a stand-alone approach, under which the national subsidiaries are supervised separately. McCauley et al (2012) document this move from the international to the multinational bank model.

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Topics:  Global crisis International finance

Tags:  banking, Too big to fail, Eurozone crisis, international banks

To end the Eurozone crisis, bury the debt forever

Pierre Pâris, Charles Wyplosz 06 August 2013

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The Eurozone’s debt crisis is getting worse despite appearances to the contrary.

Eurozone bond rate spreads have narrowed – leading some to think that the crisis is fading.1 Yet the narrowing is not due to an improvement in fundamentals. It happened after the ECB announced its Outright Monetary Transactions (OMT) programme. Mario Draghi’s, “Whatever it takes”, did the trick; investors believe the ECB could and would counter rising spreads in the medium term.2 

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Topics:  EU institutions Macroeconomic policy

Tags:  Debt crisis, Eurozone crisis, debt monetisation

How have financial markets reacted to financial-sector reforms after the crisis?

Alexander Schäfer, Isabel Schnabel, Beatrice Weder di Mauro 02 August 2013

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After the near-collapse of large parts of the financial system and unprecedented support measures from the public sector and central banks, the leaders of the G20 agreed on the need for a radical overhaul of the financial system. In parallel, several countries embarked on ambitious reforms at the national level, which have produced a set of structural measures, ranging from the prohibitions of activities and a ringfencing of retail banking to special resolution or capital regimes for systemically important institutions.

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Topics:  International finance

Tags:  regulation, global crisis, Eurozone crisis, CDS, credit default swap

Unity in diversity: Protecting the common market with divergent macroprudential policies

Aerdt Houben, Jan Kakes 30 July 2013

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The credit crisis and ensuing sovereign crisis powerfully illustrate the limitations of traditional macroeconomic policies to contain financial imbalances. Despite debate on the desirability to dampen credit cycles and asset-price fluctuations, countries have long been reluctant to include this in policy objectives.

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Topics:  Global crisis International finance

Tags:  Italy, Spain, Ireland, Greece, Eurozone crisis, Portugal, macroprudential tools, GIIPS

Why economics needs economic history

Kevin Hjortshøj O’Rourke 24 July 2013

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The current economic and financial crisis has given rise to a vigorous debate about the state of economics, and the training which graduate and undergraduates economics students are receiving. Importantly, among those arguing most strongly for a change in the way that young economists are trained are the ultimate employers of these students, in both the private and the public sector. Employers are increasingly complaining that young economists don’t understand how the financial system actually works, and are ill-prepared to think about appropriate policies at a time of crisis.

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Topics:  Economic history

Tags:  global crisis, Eurozone crisis

How to limit the ECB’s OMT?

Harald Benink, Harry Huizinga 12 July 2013

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Speaking about the Outright Monetary Transactions (OMT) facility during a recent press conference Mario Draghi, ECB President, said that “frankly, when you look at the data, it’s really very hard not to state that OMT has been probably the most successful monetary policy measure undertaken in recent times” (Draghi 2013). It is true that the launch of the OMT facility caused yields on the long-term sovereign debts of Italy and Spain to decline from their previous highs above 7% to around 4.5% now. And, until now at least, the euro has been preserved.

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Topics:  Europe's nations and regions

Tags:  Eurozone crisis, banking union, OMT

Short-time work: Does it save jobs?

Almut Balleer, Britta Gehrke, Wolfgang Lechthaler, Christian Merkl 12 July 2013

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Short-time work means that the government subsidises the reduction of the working time of an employee to prevent firing. Many countries allow a firm to use this instrument when the demand for its products is lower than its production potential. Since more firms face a shortfall of demand in recessions, there is a rule-based component of short-time work. This is similar to the income-tax system where the tax bill drops automatically with lower income (without modifying the tax code). In addition, policymakers facilitate the access to short-time work in recessions.

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Topics:  Europe's nations and regions Labour markets

Tags:  Germany, jobs, Eurozone crisis, short-time work

The impact on the financial sector of long-term low nominal interest rates

Viral Acharya, Richard Portes, Richard Reid 03 July 2013

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The Centre for Economic Policy Research (CEPR) recently organised a conference at the Brewers’ Hall, London, on 10 June 2013 titled ‘A long-term environment of low nominal interest rates: what are the consequences for the financial sector’?

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Topics:  Monetary policy

Tags:  liquidity trap, quantitative easing, Eurozone crisis, zero lower bound, Vox Views

Redistribution policies at the root of the Eurozone Crisis

Giuseppe Bertola 28 June 2013

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Not only the founding fathers of the EU, but also financial market participants appear to have believed that participation in common markets and adoption of common institutions should lead to cultural and economic convergence.

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Topics:  Europe's nations and regions

Tags:  Eurozone crisis

Financial imbalances and cycles: Do they matter for the general public?

Livio Stracca 25 June 2013

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Boom and busts in asset prices and credit and, more generally, ‘financial imbalances’ have been the subject of a lot of public attention in the wake of the global financial crisis and the Eurozone crisis. All major jurisdictions have been establishing macroprudential authorities and there is a lively discussion on whether financial stability should be an objective for central banks alongside price stability. However, nobody seems to have asked the person in the street whether they care about financial imbalances at all.

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Topics:  Global crisis International finance

Tags:  Eurozone crisis

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