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.

Stephen Cecchetti, Benjamin Cohen, 20 August 2010

The extent of the damage from the global crisis has forced policymakers to rethink how they regulate finance. This column first examines the long-term impact of stronger capital and liquidity requirements and then estimates the transitional economic impact as the new standards are phased in. It argues that, while such reforms may come at a short-term cost, the benefits of a stronger and healthier financial system will be around for years to come.

Gianluca Benigno, Huigang Chen, Christopher Otrok, Alessandro Rebucci, Eric Young, 16 August 2010

The fallout from global crisis has left many calling for economy-wide, macro-prudential policies, such as taxes on capital flows and capital controls. This column argues that the case for such measures is ambiguous at best – the excessive borrowing on which they are predicated is not a general and robust feature of financially developed and integrated economies.

Max Bruche, Gerard Llobet, 09 August 2010

Bank bailouts have been controversial from the outset, with some commentators saying that they reward banks for making risky loans. This column investigates the idea of an asset buyback in which a special purpose vehicle buys bad loans from banks' balance sheets. It argues that these buybacks could be structured to avoid windfall gains.

Raghuram Rajan, 09 July 2010

Raghuram Rajan of the University of Chicago talks to Romesh Vaitilingam about ‘The Squam Lake Report’, which brings together 15 leading US financial economists to map out a long-term plan for financial regulation reform. Among other things, they discuss capital requirements, contingent convertibles, living wills and executive compensation in financial services. The interview was recorded in London in July 2010.

Stijn Claessens, Richard Herring, Dirk Schoenmaker, 08 July 2010

Financial reform is finally emerging in the major economies but these reforms come up short on one crucial aspect – the resolution of systematically important, i.e., ‘too complex to fail’, cross-border financial institutions. The latest Geneva Report on the World Economy advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members, and a modified universal approach for other countries.

Stijn Claessens, Richard Herring, Dirk Schoenmaker, 08 July 2010

The major economies' financial reforms come up short on one crucial aspect – the resolution of systematically important cross-border financial institutions. This column introduces the latest Geneva Report on the World Economy, which advocates a two-tier solution to this problem – a universal approach for closely integrated countries such as EU members and a modified universal approach for other countries. It explicitly rejects the territorial or go-it-alone approach.

Enrico Perotti, 05 July 2010

This column argues that government measures to restore confidence in the financial system have achieved a “pause in the panic”, but this is not enough. Governments still need to reverse the dramatic slide of the financial system towards unstable funding – a trend that holds a gun to the heads of governments and central banks.

Beatrice Weder di Mauro, Ulrich Klüh, Marco Wagner, Hasan Doluca, 26 June 2010

As G20 leaders meet to discuss financial reform, this column argues that it is not too late for an international solution. It says that the EU and US should lead the way with a tax on systemically important financial institutions. Beyond internalising the costs of systemic risk, such a levy would make an international agreement more likely and raise substantial funds.

Charles Goodhart, 10 June 2010

As a consensus among academics begins to emerge over counter-cyclical financial regulation, former Bank of England Monetary Policy Committee member Charles A E Goodhart outlines why he is sceptical about “conditional convertibles” or CoCos – a form of debt that is “quasi-automatically” transformed into equity when banks get into trouble. Goodhart argues that CoCos would make the system more complex, potentially leading to problematic market dynamics.

Thorsten Beck, Thomas Losse-Müller, 31 May 2010

The global crisis has exposed the frailty of financial sectors the world over and highlighted the need for regulatory reform. This column argues that taxing banks is no panacea. The only way to achieve financial stability and financial integration in Europe is to move towards a European-level bank resolution framework that has both funding and intervention authority.

Ross Levine, 25 May 2010

Many policymakers stress that the global crisis was caused by a series of unforeseen events and “suicidal” behaviour by market players. This column argues that this is a self-serving narrative. Policymakers designed, implemented, and maintained policies that destabilised the financial system in the decade leading up to 2006 – and were fully aware they were doing so. It is a case of “negligent homicide”.

Johan Mathisen, Srobona Mitra, 25 May 2010

In contrast to much of the emerging world, capital inflows to emerging Europe continue to be weak and mixed. How should the region ensure a healthy level of foreign investment while preventing excessive capital inflows and improving the stability of the financial sector? This column argues a comprehensive policy response is needed and recommendations should be tailored to country-specific circumstances.

Giorgio Barba Navaretti, Alberto Pozzolo, Giacomo Calzolari, Micol Levi, 23 May 2010

Many commentators have called for regulation to prevent banks from becoming “too big to fail”. This column adds a cautionary note. A world with only small and domestic banks is no safer. The key benefit of multinational banks – being able to mobilise funds across countries – could still be extremely useful for maintaining stability in times of distress.

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