Priya Nandita Pooran, 14 November 2010

Will the US Dodd-Frank Act work? This column argues that unless institutional oversight shifts from the current fragmented structure to a federal one, the Dodd-Frank reforms could be prevented from having any significant positive effect on the surveillance of the financial system.

The Editors, 09 November 2010

In preparation for this week’s meeting of the G20, CEPR recently held a major conference on financial regulation – The Future of Regulatory Reform – bringing together senior policymakers, leading academics and industry practitioners. This column presents a report and video highlighting some of the speakers’ key recommendations.

Giuseppe De Martino, Massimo Libertucci, Mario Marangoni, Mario Quagliariello, 30 October 2010

Contingent capital requirements may reduce the problems of low-quality bank capital and excessively leveraged institutions, but they also risk being too complex. This column aims to strike an appropriate balance by presenting a proposal based on both macroeconomic and bank-level triggers for debt-to-equity conversion. It assesses how such a rule would have performed in identifying stressed banks in recent years.

Amar Bhidé, 29 October 2010

Amar Bhidé of Tufts University talks to Romesh Vaitilingam about his new book, ‘A Call for Judgement: Sensible Finance for a Dynamic Economy’, which explains how bad academic theories and mis-regulation have caused a dangerous divergence between the financial sector and the real economy. He calls for a return to case-by-case judgment in financial transactions, with deposit-taking institutions limited to basic lending. The interview was recorded in London in October 2010. [Also read the transcript]

Nicolas Véron, 26 October 2010

For whom is the financial crisis over? This column argues that the US response has been far more effective at reassuring investors than that in Europe. It says that stress tests have failed to trigger the needed recapitalisation and restructuring of Europe’s troubled banks. Europe’s leaders, it argues, must tackle these problems head-on.

Viral Acharya, Thomas Cooley, Matthew Richardson , Richard Sylla, Ingo Walter, 24 November 2010

Of the recent reforms to make financial systems more robust, the US Dodd-Frank Wall Street Reform and Consumer Protection Act stands out. Despite being broadly in favour of its proposals, this column identifies flaws in its design that fail to deal with the main causes of the crisis and that will lead to further implicit government guarantees.

Dirk Schoenmaker, 18 October 2010

The financial crisis has shown that countries put national interests first. On the banking side, the handling of Fortis, Lehman and the Icelandic banks are clear examples of coordination failure. On the sovereign side, the Greek saga illustrates the damage of ad hoc attempts to coordinate. This column explores how burden sharing can be made to work in practice.

Enrico Perotti, 13 October 2010

CEPR Policy Insight No.52 highlights how the 2005 bankruptcy changes created a negative externality for all intermediaries in liquidity runs, the leading cause of shock propagation in the credit crisis

Enrico Perotti, 13 October 2010

How did the bank-funding system get so fragile to mletdown and lead to the worst crisis since WWII? In a new CEPR Policy Insight, Enrico Perotti argues that an important part of the answer lies in the bankruptcy privileges granted in 2005 to overnight secured credit and derivatives by the US authorities. These privileges made such lending safe for the lenders and thus cheap for the borrowers. The result was fantastic growth in this market to the detriment of stability.

Pierre Monnin, Terhi Jokipii, 07 October 2010

Does banking sector instability damage the real economy? Or the other way round? This column presents data from 18 OECD countries between 1980 and 2008. It finds that banking sector stability appears to be an important driver of GDP growth in subsequent quarters. It argues that monetary policy should therefore pay more attention to banking sector soundness.

Thorsten Beck, Martin Brown, 06 October 2010

Access to financial services is viewed as a key determinant of economic wellbeing, especially for households in low-income countries. This column examines how the banking structure affects access to finance in 29 transition countries. It finds that changing bank ownership, deposit insurance, payment systems, and creditor protection help the wealthiest households and have little effect on the low-income, rural, or minority households.

Paolo Angelini, Andrea Nobili, 03 October 2010

Financial markets were in a state of fear during the summer of 2007. The spread between interest rates on unsecured and secured deposits recorded an unprecedented rise. This column examines trading data from European banks to argue that the widening spread was driven by aggregate factors – risk aversion and accounting practices – rather than bank-specific concerns.

Xavier Vives, 18 September 2010

With the recent wave of bank bailouts and mergers, competition in the sector has surely been affected. This column introduces a new Policy Insight arguing that a trade-off between regulation and competition in the banking sector, while complex, does exist. The optimal policy requires coordination between regulation and competition policy depending on the level of competition in the market.

Avinash Persaud, 14 September 2010

The role of financial institutions in the global crisis has led to a consensus that financial regulation must change. This column argues that the banking lobby, far from depleted, has struck back with a vengeance. It has managed to postpone the much needed regulation for a time when the need for it will be forgotten.

Adrian Blundell-Wignall, Patrick Slovik, 14 September 2010

Despite the encouraging results from the stress tests of the EU’s banking sector, market confidence in the financial system remains subdued. This column argues that while most of the sovereign debt held by EU banks is on their banking books, the EU stress test only considered their smaller trading book exposures. Market participants do not have the luxury of being so selective.

Lucia Dalla Pellegrina, Donato Masciandaro, Rosaria Pansini, 12 September 2010

The global crisis has led policymakers in the EU and the US to broaden their central banks' mandates to include greater banking supervision. This column argues that this new responsibility should be seen as an evolution of the central bank specialisation as a monetary agent rather than a reversal of the specialisation trend.

Kenneth Snowden, 10 September 2010

Was the subprime crisis inevitable? This column looks at how the last mortgage crisis in the 1930s shaped the policy landscape in the US, arguing that it eventually led to the emergence of private securitisation in the 1990s, a surge in homebuilding and homeownership, and a second great mortgage crisis that was just around the corner.

Richard Grossman, Masami Imai, 07 September 2010

One of the striking features in the buildup to the global crisis was the extent of risk taken on by highly leveraged financial institutions. This column blames such behaviour on the limited liability status of these institutions. Using data on British banks from 1878 to 1912, it finds that the banks with greater liability for their debts took on less risk.

Yeon-Koo Che, Rajiv Sethi, 04 September 2010

The role of naked credit default swaps in the global crisis is an ongoing source of controversy. This column seeks to add some formal analysis to the debate. Its model finds that speculative side bets can have significant effects on economic fundamentals, including the terms of financing, the likelihood of default, and the scale and composition of investment expenditures.

Ralph De Haas, Neeltje van Horen, 25 August 2010

The subprime crisis and subsequent global crisis have brought bank finances firmly to public attention, with many calling for stronger regulation. This column argues that the subprime crisis offered a “wake-up call” for banks, prompting them to screen and monitor their corporate borrowers more carefully without the need for more regulation. This may have contributed to the subsequent reduction in corporate lending.

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