Financial regulation and banking

Samba Mbaye, Marialuz Moreno Badia, Kyungla Chae, 12 January 2019

Since the financial crisis researchers have extensively explored the dangers of excessive public debt, but excessive private debt has received less attention. This column documents a common form of indirect private sector bailout that goes largely unnoticed. Whenever households and firms are caught in a debt overhang and need to deleverage, governments come to the rescue through a countercyclical rise in public debt. This indirect substitution takes place even in the absence of a crisis.

JT Hamrick, Farhang Rouhi, Arghya Mukherjee, Amir Feder, Neil Gandal, Tyler Moore, Marie Vasek, 09 January 2019

The surge of interest in cryptocurrencies has been accompanied by a proliferation of fraud, largely in the form of pump and dump schemes. This column provides the first measure of the scope of such schemes across cryptocurrencies. The results suggest that the phenomenon is widespread and often quite profitable, and highlight the need for concerted efforts from industry and regulators to fight cryptocurrency price manipulation. 

Anil Kashyap , Anne Wetherilt, 21 December 2018

How should banks and their regulators manage cyber risk? A new discussion paper from the CEPR sets out six principles from an economist's point of view. Anil Kashyap of the University of Chicago and Anne Wetherilt of the Bank of England tell Tim Phillips what they are recommending. 

Olena Havrylchyk, 11 December 2018

Lending-based crowdfunding platforms represent an opportunity for financial intermediation that is less leveraged, less prone to runs, and easier to resolve. This column reviews the regulatory regimes for such platforms in OECD countries and the European Commission’s proposal for the EU-wide passporting regime. Regulation requires a balance to be struck between a flexible approach that allows experimentation and strong supervision to address market failures. 

Jiangze Bian, Zhiguo He, Kelly Shue, Hao Zhou, 09 December 2018

Excessive leverage and subsequent deleveraging-induced fire sales have been major contributors in past financial crises. This column explores the behaviour of two types of margin investors– brokerage-financed and shadow-financed – during a tumultuous period for the Chinese stock market. Results show that for accounts with exposure to fire sale risk, shadow-financed accounts account for a much higher proportion of the total stock market capitalisation than brokerage-financed accounts.

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