Morris Goldstein, Nicolas Véron, 14 April 2011

Are banks too big to fail? This column suggests now is the time for Europeans to ask this question. It argues that given the potential risks to systemic stability, there is a case for policy action even in the absence of analytical certainty.

Venkatachalam Shunmugam, 09 April 2011

Derivatives markets are a controversial member of the financial-sector family. This column looks at derivatives markets across the world and notes the wide discrepancy in regulatory frameworks. It argues that this calls for the “synergistic coordination” of regulators – first at the national level and then at the global level – to ensure these markets operate efficiently and without imposing excessive risk on the wider economy.

Jean-Louis Arcand, Enrico Berkes, Ugo Panizza, 07 April 2011

Over the last three decades the US financial sector has grown six times faster than nominal GDP. This column argues that there comes a point when the financial sector has a negative effect on growth – that is, when credit to the private sector exceeds 110% of GDP. It shows that, of the advanced countries currently suffering in the fallout of the global crisis were all above this threshold.

Hans Gersbach, 02 April 2011

When banks failed, the government paid up. But the bankers responsible kept their bonuses from the years of excess. This column argues for “crisis contracts”. Such contracts require that, in the event of a crisis, bank managers forfeit a portion of their past earnings to rescue the banking system.

Raphael Auer, Sébastien Kraenzlin, 31 March 2011

Banks across the globe have a high balance-sheet exposure to foreign currencies. During the panic of the global financial crisis, the private supply of cross-border liquidity came to a halt, requiring government action. This column documents the unmet demand for cross-border liquidity for the case of the Swiss Franc and describes the countermeasures that were adopted by the Swiss authorities.

Stijn Claessens, Ceyla Pazarbasioglu, 30 March 2011

The comparisons between the global financial crisis and past episodes have been many, but this column argues that policymakers should look again, and closer. It says that without restructuring financial institutions’ balance sheets and their operations, as well as their assets, the economic recovery will suffer – and the seeds will be sown for the next crisis.

Santiago Carbó-Valverde, Edward Kane, Francisco Rodríguez Fernández, 22 March 2011

The problem of banks being too big to fail haunts discussions of regulation. This column provides new evidence on the implicit support provided to banks deemed too-difficult-to-fail and too-difficult-to-unwind in Europe and the US. It finds that regulators could be doing a much better job.

Venkatachalam Shunmugam, 19 March 2011

The exchange-traded derivatives market has been growing rapidly, particularly in the decade preceding the global crisis. This column discusses the various policies available for mitigating the downside risks and argues that the dynamic nature of the market calls for the continuous evolution of regulation and regulatory tools.

Harry Huizinga, Asli Demirgüç-Kunt, 18 March 2011

Today's big banks are enormous. By 2008, 12 banks worldwide had liabilities exceeding $1 trillion. This column, using data on banks from 80 countries over the years 1991-2009, provides new evidence on how large banks differ in terms of their risk and return outcomes and investigates how market perceptions of bank risk are affected by bank size. It concludes that policies should reward bank managers for keeping their banks safe rather than for making them big.

David Aikman, Andrew Haldane, Benjamin Nelson, 17 March 2011

Credit booms sow the seeds of subsequent credit crunches. This column argues that these have their source in cross-bank externalities. To internalise these cross-sectional spillovers, policy should operate “across the system”. It adds that this is the essence of macro-prudential policy, which, for the first time is about to be undertaken internationally.

Enrico Perotti, Javier Suarez, 16 March 2011

How to regulate systemic risk? This column presents a new CEPR discussion paper assessing the performance of Pigouvian taxes and quantity-based regulations in containing the social costs of high-risk banking. It finds that, depending on how banks differ, the socially efficient solution may be attained with Pigouvian taxes, quantity regulations, or a combination of both.

Viral Acharya, Thomas Cooley, Robert Engle, Matthew Richardson, 27 February 2011

As part of the US policy response to the global crisis, the Dodd-Frank Financial Reform Act calls for regulators to identify systemically risky financial firms – the sort that took the US financial crisis global. But how to identify these firms remains unclear. Some claim the task is impossible. This column begs to differ and names the 10 most systemically risky financial firms in the US.

David Miles, 25 February 2011

David Miles of the Bank of England's Monetary Policy Committee talks to Viv Davies about ‘Monetary Policy in Extraordinary Times’, a speech he delivered in London on 23 February 2011. Two very large shocks have hit the UK economy – the near collapse of the banking system and, more recently, a sharp increase in commodity, energy and food prices. The first shock is deflationary, the second inflationary. Miles discusses how best to set monetary policy in the wake of these shocks and analyses how regulation and monetary policy can most effectively reduce the likelihood of future financial instability. [Also read the transcript]

Russell Cooper, Hubert Kempf, 18 February 2011

Before the surprising 2007 collapse of Northern Rock, it was taken for granted that bank runs were things of the past. But their return and the modifications of deposit insurance schemes lead many to question the credibility of the government’s commitment. What makes a run on a bank? And when should the government intervene? This column provides some answers.

Anna Pavlova, Roberto Rigobon, 15 February 2011

International macro-finance is a new area of open economy macroeconomics that brings portfolio choice and asset pricing considerations into models of international macroeconomics. This column argues that the recent global crisis illustrates just how important these considerations are. It surveys recent developments in international macro-finance and suggests several promising directions for future research.

Ralph De Haas, Neeltje van Horen, 13 February 2011

Cross-border bank lending fell dramatically during the global crisis, but lending to some countries declined far more severely than to others. Recreating the monthly lending flows of the 118 largest international banks, this column finds that banks with head offices farther away from their customers are less reliable funding sources during a crisis, suggesting that the nationality of foreign banks matters.

Donato Masciandaro, María Nieto, Marc Quintyn, 07 February 2011

The European Banking Authority was established on 1 January 2011 with the chief objective of ensuring common regulatory and supervisory standards across the EU. This column asks whether it can achieve this objective under its current governance objectives. It suggests that he European Banking Authority is at least in part restricted in its ability to function.

Carlos Tavares, 12 January 2011

Some argue that the widening spreads between sovereign debt in Germany and that of other European countries have been exacerbated by activity in the market for credit default swaps. This column argues that “naked credit default swaps” are of a different nature to naked short selling and deserve to be treated so. It explores insights from the academic literature, market participants, and securities regulators.

Carlos Tavares, 09 January 2011

With the economic crisis mutating, now is the hour of the regulator. This column argues that policymakers should take heed; the opacity of over-the-counter trading should come to an end and regulation and transparency should be extended to all corners of the financial sector.

Biagio Bossone, 18 December 2010

How do banks and capital markets interact? This column brings together evidence to show that banks and capital markets, rather than simply being competitors, are in fact complements to each other – a finding that has implications for policy.

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