Shadow banking and the global financial ecosystem

Zoltan Pozsar, 7 November 2013

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Regulatory reform has focused on banks and how much liquidity and capital they should hold, rather than on the evolution of the broader financial ecosystem that banks are only a part of. However, understanding this ecosystem is imperative, as it can influence the types of activities banks engage in and the types of liabilities they issue.

Topics: Financial markets, Microeconomic regulation
Tags: banking, intermediation, risk, shadow banking

Towards a more procyclical financial system

Jon Danielsson, 6 March 2013

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The Basel Committee and the European Banking Authority1 have recently noted that banks' risk models do not give the same risk assessments for the same assets. In other words, banks’ risk models are not the same, making use of different estimation horizons and model assumptions, whilst reflecting different preferences and specific institutional situations.

Topics: International finance
Tags: risk, risk models

Systemic risks in global banking: What available data can tell us and what more data are needed?

Eugenio Cerutti, Stijn Claessens, Patrick McGuire, 17 December 2012

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 The starting point for systemic risk analysis for a single-country is typically the banking system1. A systemic risk analysis involves the use of disaggregated national bank data, including information on the composition of banks’ asset and liabilities, maturity and currency mismatches, and other balance sheet and income metrics.

Topics: Global crisis, International finance
Tags: banking, global crisis, risk

Don't expect too much from EZ fiscal union – and complete the unfinished integration of European capital markets!

Mathias Hoffmann, Bent E. Sørensen, 9 November 2012

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The sovereign debt crisis apparently suggests that Eurozone economies should now move substantially closer towards fiscal union. Current policy discussions revolve much more around how such a fiscal union should be designed than whether fiscal union can solve Europe’s underlying problems of economic coherence. What can we expect from a fiscal union?

Topics: EU policies, International finance, Monetary policy
Tags: banking union, capital markets, Eurozone crisis, fiscal union, risk, Risk sharing

Why supervisors should continue measuring financial risks – the fallacy of simple rules

Lars Frisell, 7 November 2012

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Measuring financial risk is notoriously difficult. But no more difficult than measuring any other risk. Take, for example, the risk of flooding.

Topics: Financial markets, Global crisis, Institutions and economics, International finance
Tags: capital charges, global crisis, global crisis debate, leverage ratios, risk

Bankers’ bonuses and the financial crisis

Ian Tonks, 8 January 2012

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In the fallout from the financial crisis of 2007-8, a number of official policy documents have reported on its causes and have identified executive pay packets and bonuses in banks and financial institutions as being partly to blame.

Topics: Global crisis, International finance
Tags: banker bonuses, incentives, risk

Fiscal policy in developing countries: Escape from procyclicality

Jeffrey Frankel, Carlos A. Vegh , Guillermo Vuletin, 23 June 2011

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Fiscal policy is taking centre stage. Among advanced countries, the news is bad; Europe’s periphery teeters, the UK slashes, the US deadlocks, Japan muddles. But in the rest of the world there is good news. In an historic reversal, many emerging market and developing countries have over the last decade achieved a countercyclical fiscal policy.

Topics: Global crisis, Institutions and economics, Macroeconomic policy
Tags: fiscal policy, risk, spreads

CoCo design as a risk preventive tool

Enrico Perotti, Mark Flannery, 9 February 2011

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The financial crisis saw local credit losses spread widely because bank capital was insufficient to cope with the accumulated credit risk, maturity mismatch, and contingent liquidity risk. Ultimately, short-term liability holders lost faith in some large banks’ ability to repay them. The resulting runs forced supervisors to step in with government support.

Topics: Financial markets
Tags: capital buffer, Contingent convertible bonds, financial crises, risk

The “limits of arbitrage” agenda

Dimitri Vayanos, Denis Gromb, 10 April 2010

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Each financial crisis reminds us that governments are vital to the functioning of financial markets – with the current crisis being a particularly painful reminder (see for example Boone and Johnson 2010, Dewatripont et al. 2009).

Topics: Financial markets, International finance
Tags: law of one price, limits of arbitrage, risk

Too much capital, not enough safety?

Avinash Persaud, 13 June 2009

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There is a strong consensus that banks had insufficient reserves set aside for a rainy day and that they should be required to hold more capital – more capital for credit risks, more capital for the economic cycle, more capital for liquidity risks, more capital for operational risks, more capital for risks as a result of compensation practices, in short, more capital for anything that mov

Topics: Financial markets
Tags: capital requirements, risk, risk management

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