Stephen Cecchetti, Kim Schoenholtz, 03 December 2017

The Global Crisis dramatically revealed the severity of ignorance about risk exposure in the global financial system. A major issue is the complexity of legal structures with webs of subsidiaries and a lack of consolidated information systems. This column describes efforts to address these failings through the launching of a global legal entity identifier. The initiative offers great promise for addressing the complex information problems. However, network externalities imply that its success will depend on participation and adoption incentives.

Di Gong, Harry Huizinga, Luc Laeven, 18 February 2016

Prior to the Global Crisis, banks could easily use off-balance sheet structures to lower their effective capitalisation rates. This column examines another way that US banks circumvented capital regulations – by maintaining minority-owned, non-consolidated subsidiaries. Had these subsidiaries been consolidated, average reported equity-to-assets ratios would have been 3.5% lower. These findings suggest that some US banks were actively misrepresenting the riskiness of their assets prior to the crisis.

Bernhard Dachs, Georg Zahradnik, 06 July 2014

The Global Crisis brought a halt to three decades of R&D internationalisation, in which foreign firms’ share of total R&D expenditure had increased in almost all countries where data is available. However, this column argues that the crisis did not lead to a new global distribution of overseas R&D expenditure, despite the erosion of the EU’s share. The persistence of R&D expenditure is attributed to the costs of relocating R&D and to the autonomy of foreign subsidiaries.

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