dunnettreader + nbfi   55

Gary Gorton
Mobile Collateral versus Immobile Collateral
Gary Gorton, Tyler Muir
NBER Working Paper No. 22619
Issued in September 2016
NBER Program(s):   AP   CF   DAE   EFG   ME
In the face of the Lucas Critique, economic history can be used to evaluate policy. We use the experience of the U.S. National Banking Era to evaluate the most important bank regulation to emerge from the financial crisis, the Bank for International Settlement's liquidity coverage ratio (LCR) which requires that (net) short-term (uninsured) bank debt (e.g. repo) be backed one-for-one with U.S. Treasuries (or other high quality bonds). The rule is narrow banking. The experience of the U.S. National Banking Era, which also required that bank short-term debt be backed by Treasury debt one-for-one, suggests that the LCR is unlikely to reduce financial fragility and may increase it.
NBFI  NBER  financial_stability  risk_management  collateral  financial_economics  capital_markets  bad_regulation  leverage  financial_system  risk-systemic  paywall  money_market  banking  paper  financial_regulation  BIS 
october 2016 by dunnettreader
Hanson, Shleifer, Stein & Vishny - Banks as patient fixed-income investors (2015) | Andrei Shleifer - J of Fin Econ
Hanson, Samuel, Andrei Shleifer, Jeremy C Stein, and Robert W Vishny. 2015. “Banks as patient fixed-income investors.” Journal of Financial Economics 117 (3): 449-469.
We examine the business model of traditional commercial banks when they compete with shadow banks. While both types of intermediaries create safe “money-like” claims, they go about this in different ways. Traditional banks create money-like claims by holding illiquid fixed-income assets to maturity, and they rely on deposit insurance and costly equity capital to support this strategy. This strategy allows bank depositors to remain “sleepy”: they do not have to pay attention to transient fluctuations in the market value of bank assets. In contrast, shadow banks create money-like claims by giving their investors an early exit option requiring the rapid liquidation of assets. Thus, traditional banks have a stable source of funding, while shadow banks are subject to runs and fire-sale losses. In equilibrium, traditional banks have a comparative advantage at holding fixed-income assets that have only modest fundamental risk but are illiquid and have substantial transitory price volatility, whereas shadow banks tend to hold relatively liquid assets. -- downloaded via iPhone to DBOX
article  institutional_investors  banking  shadow_banking  NBFI  long-term  equity  liquidity  bond_markets  money_market  deposits  risk-systemic  investment  downloaded  asset_prices  insolvency  risk_management  capital_adequacy 
august 2016 by dunnettreader
Iryna Stewen & Mathias Hoffmann - Holes in the Dike: the global savings glut, US house prices & the long shadow of banking deregulation (2015 wp)
Verein für Socialpolitik / German Economic Association in its series Annual Conference 2015 (Muenster): Economic Development - Theory and Policy with number 112834. -- Abstract -- We explore empirically how capital inflows into the US and financial deregulation within the United States interacted in driving the run-up (and subsequent decline) in US housing prices over the period 1990-2010. To obtain an ex ante measure of financial liberalization, we focus on the history of interstate-banking deregulation during the 1980s, i.e. prior to the large net capital inflows into the US from China and other emerging economies. Our results suggest a long shadow of deregulation: in states that opened their banking markets to out-of-state banks earlier, house prices were more sensitive to capital inflows. We provide evidence that global imbalances were a major positive funding shock for US wide banks: different from local banks, these banks held a geographically diversified portfolio of mortgages which allowed them to tap the global demand for safe assets by issuing private-label safe assets backed by the country-wide US housing market. This, in turn, allowed them to expand mortgage lending and lower interest rates, driving up housing prices. -- downloaded via iPhone to DBOX
banking  financial_crisis  deregulation  US_economy  downloaded  financial_regulation  global_imbalance  capital_markets  post-Cold_War  financial_system  interstate_banking  savings  house_prices  securitization  financial_innovation  interest_rates  mortgages  international_finance  capital_flows  community_banks  paper  21stC  economic_history  competition-interstate  NBFI 
august 2016 by dunnettreader
What It's Worth - Building a Strong Financial Future
Americans everywhere struggle to build strong financial futures for themselves and their families. The new book, What It's Worth, provides a roadmap for what families, communities and our nation can do to move forward on the path to financial well-being.
Collection of essays by people working on financial inclusion, asset-building etc. - downloaded via iPhone to DBOX
gig_economy  education-finance  philanthropy  credit  usury  financial_innovation  US_society  inequality-wealth  local_government  pensions  corporate_citizenship  mobility  banking  wages  health_care  access_to_finance  housing  financial_regulation  report  social_entrepreneurs  poverty  downloaded  welfare  US_economy  US_politics  families  mortgages  segregation  inequality  NBFI  unemployment  US_government 
april 2016 by dunnettreader
Robert Kosowski, Juha Joenväärä - Regulation and fund performance: New evidence | VOX, CEPR’s Policy Portal - 14 September 2015
In the aftermath of the Global Crisis, there have been many regulatory initiatives targeting financial institutions, especially investment funds. This column sheds light on the costs and benefits of increased financial regulation. The findings show that the indirect cost of regulation of alternative funds such as UCITS is around 2% per annum in terms of risk-adjusted returns. Policymakers should therefore carefully consider the effect of higher liquidity requirements on the returns that alternative investment funds can generate.
paper  financial_regulation  institutional_investors  NBFI 
september 2015 by dunnettreader
Symposium: The Bailouts of 2007-2009 (Spring 2015) | AEAweb: Journal of Economic Perspectives Vol. 29 No.2
Austan D. Goolsbee and Alan B. Krueger - A Retrospective Look at Rescuing and Restructuring General Motors and Chrysler (pp. 3-24) **--** W. Scott Frame, Andreas Fuster, Joseph Tracy and James Vickery - The Rescue of Fannie Mae and Freddie Mac (pp. 25-52) **--** Charles W. Calomiris and Urooj Khan - An Assessment of TARP Assistance to Financial Institutions (pp. 53-80) **--** Robert McDonald and Anna Paulson - AIG in Hindsight (pp. 81-106) **--** Phillip Swagel - Legal, Political, and Institutional Constraints on the Financial Crisis Policy Response (pp. 107-22) -- available online, didn't download
article  journals-academic  financial_system  Great_Recession  financial_crisis  bailouts  bail-ins  capitalism-systemic_crisis  capital_markets  banking  bank_runs  shadow_banking  NBFI  securitization  credit_booms  credit_ratings  incentives-distortions  public-private_partnerships  Fannie_Mae  housing  leverage  financial_system-government_back-stop  financial_innovation  firesales  liquidity  asset_prices  Fed  lender-of-last-resort  regulatory_capture  regulatory_avoidance  credit_crunch  bankruptcy  government_agencies  government_finance  global_economy  global_governance  international_finance  international_monetary_system  international_crisis  property_rights  derivatives  clearing_&_settlement  GSEs  bubbles 
september 2015 by dunnettreader
Jane E. Ihrig, Ellen E. Meade, Gretchen C. Weinbach - Monetary Policy 101: A Primer on the Fed's Changing Approach to Policy Implementation | US Federal Reserve Board of Governors - June 2015. - via IDEAS
The Federal Reserve conducts monetary policy in order to achieve its statutory mandate of maximum employment, stable prices, and moderate long-term interest rates as prescribed by the Congress and laid out in the Federal Reserve Act. For many years prior to the financial crisis, the FOMC set a target for the federal funds rate and achieved that target through purchases and sales of securities in the open market. In the aftermath of the financial crisis, with a superabundant level of reserve balances in the banking system having been created as a result of the Federal Reserve's large scale asset purchase programs, this approach to implementing monetary policy will no longer work. This paper provides a primer on the Fed's implementation of monetary policy. We use the standard textbook model to illustrate why the approach used by the Federal Reserve before the financial crisis to keep the federal funds rate near the FOMC's target will not work in current circumstances, and explain the approach that the Committee intends to use instead when it decides to begin raising short-term interest rates. -- downloaded pdf to Note
US_economy  financial_system  Fed  central_banks  monetary_policy  interest_rates  money_market  banking  GSEs  institutional_investors  NBFI  downloaded 
august 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - How the Fed will tighten — Money, Banking and Financial Markets - August 2015
So, as the FOMC moves to “normalize” monetary policy after years of extraordinary accommodation – eventually raising the federal funds rate to their projected long-run norm of nearly 4% – how, precisely, will the Fed tighten monetary policy? The answer is that the mechanics will be fundamentally different from previous Fed tightening cycles. While the nature of the prospective policy tools will be familiar to long-time specialists, their use will be radically different. As a result, the chapter on Fed operations in money and banking textbooks (including ours) will once again be substantially amended to explain this new framework to the next generation of students aiming to understand the U.S. central bank. This post summarizes why the Fed’s policy mechanics must change and the basics of how the operating framework will function going forward. For those interested in a more detailed version of this discussion, Fed researchers Ihrig, Meade, and Weinbach recently published an excellent primer that is likely to be a reference for years to come. Tags: Federal Reserve, Policy tools, Policy mechanics, Repo, Reverse repo, ON RRP, Term RRP, Term deposit, IOER, IORR, Interest on reserves, GSEs -- downloaded page as pdf to Note
US_economy  financial_system  Fed  central_banks  monetary_policy  interest_rates  money_market  banking  GSEs  institutional_investors  NBFI  downloaded 
august 2015 by dunnettreader
Financial Market Trends - OECD Journal - Home page | OECD
‌The articles in Financial Market Trends focus on trends and prospects in the international and major domestic financial markets and structural issues and developments in financial markets and the financial sector. This includes financial market regulation, bond markets and public debt management, insurance and private pensions, as well as financial statistics. -- links to the contents of each issue of the journal
journal  website  paper  financial_system  global_economy  global_system  financial_regulation  financial_crisis  capital_markets  risk-systemic  international_finance  banking  NBFI  insurance  markets-structure  risk_assessment  risk_management  sovereign_debt  corporate_finance  corporate_governance  institutional_investors  pensions  consumer_protection  equity-corporate  equity_markets  debt  debt-overhang  leverage  capital_flows  capital_adequacy  financial_economics  financial_innovation  financial_system-government_back-stop  bailouts  too-big-to-fail  cross-border  regulation-harmonization  regulation-costs  statistics 
july 2015 by dunnettreader
Hans Degryse, Liping Lu, Steven Ongena - Informal or formal financing: First evidence on co-funding of Chinese firms | VOX, CEPR’s Policy Portal - 21 August 2013
Non-bank financing originating in the shadow banking system has increasingly become an issue for policymakers. This column argues that informal financing has, in fact, been an essential element of corporate performance in China. Through reviewing the interaction between informal and formal financing, evidence suggests that informal financing simultaneously granted with formal financing (co-funding) is helpful for growth, especially for small firms. -- informal financing may complement the use of formal financing, so that co-funding can better enhance firm growth. We conclude that the informal credit market should not be simply repressed as it may co-exist with the formal banking system and supports firm growth in a proper way. As the risks in the shadow banking system has not been regulated properly in China, it is high time that the Chinese regulators curtail the risks and channel the non-bank lending into a proper track in order to avoid a debt crisis. Informal financiers could then still continue to be a vital player in the Chinese credit market and sustain the high economic growth.
paper  China-economy  shadow_banking  NBFI  intermediation  information-intermediaries  access_to_finance  economic_growth  corporate_finance  financial_regulation 
july 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Dodd-Frank: Five Years After — Money, Banking and Financial Markets - June 2015
On July 21, 2010, President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (hereafter, DF), the most sweeping financial regulatory… Very good roundup of the holes that are left, the inability to force a coherent inter-agency approach to key risk regulation areas (e.g. the Financial Stability Oversight couldn't force the SEC to write adequate Money Market Funds reg, making it even worse than before the crisis), and the areas where regs are excessively complex, costly etc -- so they either won't do the job (and regulators will wind up making ad hoc exceptions because they're not workable) or their going to get gamed. Basically comes down to the age-old problem of regulation by institutional form rather than by function. The financial crisis was the best chance we had to rationalize the system, and Paulson had Treasury working on a proposal to do just that, but it got trashed when the financial system blew up and everybody was battling for narrow interests in a crisis atmosphere with inflamed populist politics -- only thing positive was finally getting rid of OCC. I do think they're unnecessarily suspicious of the new consumer protection agency -- given that a full overhaul wasn't possible, somebody needs to be responsible for looking out for consumers, since the main regulators are focused on financial risk issues at the institutional or system level.
Instapaper  US_economy  US_politics  financial_regulation  financial_crisis  Fed  SEC  banking  capital_markets  government_agencies  risk  risk-systemic  risk_management  NBFI  shadow_banking  money_market  institutional_investors  consumer_protection  leverage  capital_adequacy  inter-agency  liquidity  arbitrage  markets-structure  intermediation  financial_instiutions  financial_system-government_back-stop  from instapaper
june 2015 by dunnettreader
Macroprudentialism – A new Vox eBook | VOX, CEPR’s Policy Portal 15 December 2014
Dirk Schoenmaker -- overview and TOC -- Macroprudentialism is now part of the standard macroeconomic toolkit but it involves a set of relatively untested policies. This column introduces a new VoX eBook that collects the thinking of a broad range of leading US and European economists on the matter. A consensus emerges on broad objectives of macroprudential supervision, but important disagreements remain among the authors. -- downloaded pdf to Note
financial_system  financial_regulation  financial_crisis  central_banks  macroprudential_regulation  leverage  business_cycles  banking  NBFI  shadow_banking  monetary_policy  EU  Eurozone  OECD_economies  credit  mortgages  downloaded 
june 2015 by dunnettreader
Pedro Gurrola-Perez and David Murphy - :Filtered historical simulation Value-at-Risk models and their competitors | Bank of England - Working Paper No. 525 March 2015-
Financial institutions have for many years sought measures which cogently summarise the diverse market risks in portfolios of financial instruments. This quest led institutions to develop Value-at-Risk (VaR) models for their trading portfolios in the 1990s. Subsequently, so-called filtered historical simulation VaR models have become popular tools due to their ability to incorporate information on recent market returns and thus produce risk estimates conditional on them. These estimates are often superior to the unconditional ones produced by the first generation of VaR models. This paper explores the properties of various filtered historical simulation models. We explain how these models are constructed and illustrate their performance, examining in particular how filtering transforms various properties of return distribution. The procyclicality of filtered historical simulation models is also discussed and compared to that of unfiltered VaR. A key consideration in the design of risk management models is whether the model’s purpose is simply to estimate some percentile of the return distribution, or whether its aims are broader. We discuss this question and relate it to the design of the model testing framework. Finally, we discuss some recent developments in the filtered historical simulation paradigm and draw some conclusions about the use of models in this tradition for the estimation of initial margin requirements. -- downloaded pdf to Note
paper  financial_instiutions  risk  risk_management  financial_regulation  banking  business_cycles  capital_markets  capital_adequacy  NBFI  probability  economic_models  Basel  downloaded 
june 2015 by dunnettreader
Douglas J. Elliott and Qiao Yu - Reforming shadow banking in China | Brookings Institution - May 12, 2015
Shadow banking has become an important, and rapidly growing, part of Chinese finance. Much of the reporting and analysis for this sector focuses on the risks of shadow banking, which clearly do exist and are significant. However, the societal benefits, on the whole, appear to be even greater. Therefore, shadow banking should be reformed, to reduce the risks and increase the benefits, not abolished or shrunk simply for the sake of reducing its importance. The right approach is to find the optimum balance of societal benefits and risks, not to aim for an arbitrary size or role. Further, much of shadow banking results from a web of regulatory, bureaucratic, and policy constraints and pressures on the formal banking sector, as well as some internal weaknesses at the banks. Therefore, reform recommendations arising from a consideration of shadow banking need to extend into the formal banking sector. -- This paper will focus on recommendations for regulatory reform -- didn't download
paper  China-economy  banking  NBFI  shadow_banking  regulation-enforcement  financial_system  financial_regulation  financial_sector_development  financial_stability 
may 2015 by dunnettreader
Charles A.E. Goodhart, Enrico Perotti - Maturity mismatch stretching: Banking has taken a wrong turn | VOX, CEPR’s Policy Portal CEPR - Policy Insight 81 05/06/2015
Banks were not always as mismatched as today.Till the 19th century, bank lending to the private sector was meant to be primarily for short-term, self-liquidating, trade-related working capital, especially in the guise of ‘real bills’, bills of exchange fnancing trade. This was true since the emergence of banks in the 15th century, supporting merchants in their long-distance trade. This approach persisted in the Anglo-American tradition, where banks discounted promissory notes and held the rest of the portfolio in easily saleable securities, especially Consols. This enabled a credible promise to depositors, as banks’ assets were either short-term, or easily sold, with little maturity mismatch. -- And then came Continental universal banking, employed to play catch up -- and then with disintermediation, and the need for banks to find other business, and securitization, and they became hostage to the long-wave boom and bust of real estate -- Land is scarce and its availability is fxed. In other words, real estate value has a large pure rent component. Thus in any expansion, real estate prices generally rise faster than consumer prices, and become prone to bubbles and busts. To avoid socialising risk taking, what is needed is an intermediation process where the fnancing comes from investors that assume the bulk of such risk. We call for solutions that ensure such risk bearing by focusing on two principles: much greater maturity matching and no insured deposit funding. These goals may be achieved by various means. One avenue is to securitise mortgages with little maturity transformation, such as those funded by bond or pension funds. Another is to create new intermediaries providing mortgage loans where the lender shares in the appreciation, while assuming some risk against the occasional bust. This may be seen as a shift towards the principles of Islamic banking, but it is also a return to tradition as in the early days of banking. -- downloaded pdf to Note
economic_history  18thC  19thC  20thC  21stC  banking  banking-universal  intermediation  maturity_transformation  disintermediation  capital_markets  securitization  housing  real_estate  bubbles  mortgages  financial_innovation  financial_crisis  liquidity  institutional_investors  debt-restructuring  debt-overhang  financial_stability  financial_system-government_back-stop  NBFI  downloaded 
may 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - An Open Letter to Bill McNabb, CEO of Vanguard Group - May 2015
Dear Mr. McNabb, We find your WSJ op-ed (Wednesday, May 6) misleading, short-sighted, self-serving, and very disappointing. Vanguard has been in the forefront… No kidding! Appaling that the money market fund industry has been allowed to reach such insane size while providing money-equivalents for all investors/savers that can't hold up in an incipient panic. If the government is going to be forced to, effectively, provide deposit insurance, at least the amounts should be capped and transparent and the risks properly priced. That the SEC couldn't get its act together on NNFs is the most glaring evidence of regulatory capture in the whole sorry mess.
financial_system  financial_regulation  financial_crisis  shadow_banking  NBFI  money_market  financial_system-government_back-stop  SEC  regulatory_capture  risk-systemic  liquidity  asset_management  asset_prices  from instapaper
may 2015 by dunnettreader
Economist's View: 'Social Costs of the Financial Sector' - Luigi Zingale lecture and paper - May 2015
Via Tim Taylor, a quotation from Luigi Zingales ("watch video of the lecture or read the talk at his website"): "While there is no doubt that a developed economy needs a sophisticated financial sector, at the current state of knowledge there is no theoretical reason or empirical evidence to support the notion that all the growth of the financial sector in the last forty years has been beneficial to society. In fact, we have both theoretical reasons and empirical evidence to claim that a component has been pure rent seeking. ..." -- downloaded pdf to Note of Zingale paper
financial_system  financial_innovation  financial_sector_development  rent-seeking  financial_regulation  financialization  capital_markets  banking  NBFI  shadow_banking  economic_growth  video  downloaded 
may 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz - Residential real estate in China: the delicate balance of supply and demand — Money, Banking and Financial Markets - April 2015
Some observers believe that demand for housing in China is price-insensitive for cultural reasons. Among other things, housing is viewed as a “status good” for those wishing to get married. Another favorable factor is the preparedness of Chinese policymakers to intervene and support housing markets should they soften. Then there is the possibility that central bank policy will be adjusted in a manner designed to further support real estate lending. Yet, there remain grounds for skepticism. The role of big-city home ownership as a status good in Japan did not prevent the massive and destructive land and housing price boom and bust in the 1980s. And, government actions to support China’s housing prices will be fighting an uphill battle if private expectations of capital gains weaken. Not only that, but the day may come when China sees the need to implement a tax on property, if only to provide a better underpinning for municipal finances. This would almost surely drive prices down quickly. Finally, the government’s other objectives of liberalizing the financial system (as a step toward internationalizing the renminbi) and increasing housing supply to meet the needs of a migrating population may prove incompatible with supporting high house price-to-rent ratios. -- really fine update on what's been happening in urbanization, local governments, policies re financial sector liberalization, GNP and personal income growth (and slow down) etc -- copied to Pocket
China  China-economy  financial_system  housing  asset_prices  bubbles  urbanization  economic_growth  financial_regulation  financial_sector_development  financial_stability  banking  NBFI  shadow_banking  regulation-enforcement  tax_reform  taxes  local_government  infrastructure  wages  economic_culture  municipal_finance  Pocket 
april 2015 by dunnettreader
Steve Cecchetti and Kim Schoenholtz -The mythic quest for early warnings — Money, Banking and Financial Markets - April 2015
Reviews a number of stress indexes developed since the financial crisis -- most show a good way of indicating where we are at any one time, and several may be useful in crisis management for identifying institutions with liquidity vs insolvency problems, but none tell us where we're going **--** Where does this leave us? Our answer is that we have yet another reason to be skeptical of time-varying, discretionary regulatory policy. In an earlier post, we noted that the combination of high information requirements, long transmission lags and significant political resistance made it unlikely time-varying capital requirements will be effective in reducing financial vulnerabilities. Our conclusion then, which we reiterate now, is that the solution is to build a financial system that is safe and resilient all of the time, since we really never know what is coming. That means a regulatory system based on economic function, not legal form, with sufficient capital buffers to guard against all but the very worst possibilities. In the end, a financial system that relies on an early warning indicator of imminent financial collapse seems destined to fail. -- copied to Pocket
financial_system  financial_regulation  financial_crisis  capital_adequacy  capital_markets  NBFI  information-markets  information-asymmetric  risk  risk-systemic  risk_management  Great_Recession  global_governance  banking  bank_runs  liquidity  Pocket 
april 2015 by dunnettreader
Andrew W. Lo, Thomas J. Brennan - Do Labyrinthine Legal Limits on Leverage Lessen the Likelihood of Losses?: An Analytical Framework - Texas Law Review, Vol. 90, No. 7, 2012 :: SSRN
Andrew Lo - Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER) *--* Thomas J. Brennan - Northwestern University School of Law. **--** A common theme in the regulation of financial institutions and transactions is leverage constraints. Although such constraints are implemented in various ways — from minimum net capital rules to margin requirements to credit limits — the basic motivation is the same: to limit the potential losses of certain counterparties. However, the emergence of dynamic trading strategies, derivative securities, and other financial innovations poses new challenges to these constraints. We propose a simple analytical framework for specifying leverage constraints that addresses this challenge by explicitly linking the likelihood of financial loss to the behavior of the financial entity under supervision and prevailing market conditions. An immediate implication of this framework is that not all leverage is created equal, and any fixed numerical limit can lead to dramatically different loss probabilities over time and across assets and investment styles. This framework can also be used to investigate the macroprudential policy implications of microprudential regulations through the general-equilibrium impact of leverage constraints on market parameters such as volatility and tail probabilities. -- Pages in PDF File: 36 -- Leverage, Liquidity, Financial Regulation, Capital Requirements, Macroprudential Policies, Net Capital Rules -- downloaded pdf to Note
article  SSRN  financial_system  financial_regulation  financial_crisis  markets-structure  banking  NBFI  shadow_banking  leverage  capital_adequacy  liquidity  capital_markets  money_market  derivatives  arbitrage  macroprudential_policies  macroprudential_regulation  risk-systemic  financial_innovation  bank_runs  downloaded 
april 2015 by dunnettreader
Reading About the Financial Crisis: A 21-Book Review by Andrew W. Lo :: SSRN
Massachusetts Institute of Technology (MIT) - Sloan School of Management; Massachusetts Institute of Technology (MIT) - Computer Science and Artificial Intelligence Laboratory (CSAIL); National Bureau of Economic Research (NBER) -- The recent financial crisis has generated many distinct perspectives from various quarters. In this article, I review a diverse set of 21 books on the crisis, 11 written by academics, and 10 written by journalists and one former Treasury Secretary. No single narrative emerges from this broad and often contradictory collection of interpretations, but the sheer variety of conclusions is informative, and underscores the desperate need for the economics profession to establish a single set of facts from which more accurate inferences and narratives can be constructed. -- Pages in PDF File: 41 -- Keywords: Financial Crisis, Systemic Risk, Book Review -- downloaded pdf to Note
paper  SSRN  reviews  books  economic_history  21stC  Great_Recession  financial_crisis  financial_system  financial_regulation  financialization  capital_markets  banking  NBFI  shadow_banking  regulation-enforcement  rent-seeking  fraud  debt  debtors  housing  securitization  derivatives  bank_runs  banking-universal  Glass-Steagal  risk_management  risk-systemic  financial_economics  global_system  global_imbalance  capital_flows  institutional_investors  institutional_economics  bubbles  Minsky  downloaded 
april 2015 by dunnettreader
Òscar Jordà, Moritz Schularick, and Alan M. Taylor - Mortgaging the Future? | The Big Picture - Guest Post - March 27th, 2015
In the six decades following World War II, bank lending measured as a ratio to GDP has quadrupled in advanced economies. To a great extent, this unprecedented expansion of credit was driven by a dramatic growth in mortgage loans. Lending backed by real estate has allowed households to leverage up and has changed the traditional business of banking in fundamental ways. This “Great Mortgaging” has had a profound influence on the dynamics of business cycles. -- update of their 2012 article that goes back to 19thC and does more breakdown of the changes in the financial services industry -- downloaded page as pdf to Note
US_economy  economic_history  macroeconomics  financial_system  financial_innovation  financial_crisis  housing  mortgages  credit  debt  debt_crisis  business_cycles  financialization  NBFI  real_estate  banking  macroprudential_policies  macroprudential_regulation  macroeconomic_policy  downloaded 
march 2015 by dunnettreader
Rajiv Sethi: Perspectives on Exchange-Traded Funds - December 2010
Are ETFs good or bad for the market? That was the title of a lively and interesting session at Markets Media's third annual Global Markets Summit last Thursday. The session was organized as an old-fashioned debate between two teams. On one side were David Weild and Harold Bradley (joined later by Robert Litan on video), who argued that heavily traded funds composed of relatively illiquid small-cap stocks were responsible, in part, for the sharp decline in initial public offerings over the past decade, with devastating consequences for capital formation and job creation. Responding to these claims were Bruce Lavine, Adam Patti and Robert Holderith, all representing major sponsors of funds (WisdomTree, IndexIQ and EGShares respectively). The sponsors argued that they are marketing a product that is vastly superior to the traditional open-end fund, provides investors with significant liquidity, transparency and tax advantages, and is rapidly gaining market share precisely because of these benefits. From their perspective, it makes as little sense to blame exchange-traded funds for declining initial public offerings and the sluggish rate of job creation as it does to blame them for hurricanes or influenza epidemics. -- quite interesting discussion especially in comments -- brings in the issue of HFT as well -- liquidity (a mirage), correlation among stocks that looks excessive, reducing ability to diversify, insufficient diversity of trading strategies, disappearance(?) of market makers, general issues re indexing, benchmarkings, small caps markets too thin to support research, information arbitrage to improve valuations etc
capital_markets  markets-structure  liquidity  IPOs  capital_formation  HFT  NBFI  ETFs  institutional_investors  indexing  SMEs 
march 2015 by dunnettreader
Kose, Prasad, Rogoff & Wei (2009) - Financial Globalization: A Reappraisal
downloaded to iPhone - see also papers citing this - The literature on the benefits and costs of financial globalization for developing countries has exploded in recent years, but along many disparate channels with a variety of apparently conflicting results. There is still little robust evidence of the growth benefits of broad capital account liberalization, but a number of recent papers in the finance literature report that equity market liberalizations do significantly boost growth. Similarly, evidence based on microeconomic (firm- or industry-level) data shows some benefits of financial integration and the distortionary effects of capital controls, but the macroeconomic evidence remains inconclusive. At the same time, some studies argue that financial globalization enhances macroeconomic stability in developing countries, but others argue the opposite. This paper attempts to provide a unified conceptual framework for organizing this vast and growing literature, particularly emphasizing recent approaches to measuring the catalytic and indirect benefits to financial globalization. Indeed, it argues that the indirect effects of financial globalization on financial sector development, institutions, governance, and macroeconomic stability are likely to be far more important than any direct impact via capital accumulation or portfolio diversification. This perspective explains the failure of research based on cross-country growth regressions to find the expected positive effects of financial globalization and points to newer approaches that are potentially more useful and convincing.
credit  financial_innovation  spreads  financial_crisis  contagion  investment  financial_sector_development  interest_rates  FDI  emerging_markets  download  bubbles  FX  capital_flows  monetary_policy  fiscal_policy  financial_system  IMF  banking  NBFI  business_cycles  sovereign_debt  global_economy  macroeconomics  globalization 
january 2015 by dunnettreader
It's the leverage, stupid!
Minsky cycles have always applied especially to real estate due to the long time lags. These guys show how it was key for Great Recession. -- All of this leads us to draw two simple conclusions. First, investors and regulators need to be on the lookout for leverage; that’s the biggest villain. In the United States and many other countries, mortgage borrowing has been at the heart of financial instability, and it may be so again in the future. But we should not be lulled into a sense of security just because banks’ real estate exposure has declined. If leverage starts rising in real estate or elsewhere – on or off balance sheet – then we should be paying attention.
Great_Recession  financial_crisis  leverage  banking  NBFI  shadow_banking  financial_regulation 
december 2014 by dunnettreader
Narrow Banks Won't Stop Bank Runs — Money, Banking and Financial Markets - April 2014
Banks serve capitalist economies in two ways that are costly to replicate. First, they are experts in providing liquidity both to depositors and to borrowers. For the former, it is deposits and for the latter, lines of credit (such as home equity loans that can be used when the borrower needs the funds). Second, they have expertise both in screening potential borrowers and then in monitoring those to whom they make loans. That is, they specialize in mitigating the information problems that plague all financial transactions.(..) the main point: would narrow banking really eliminate runs? Would it solve the fragility problem its proponents suggest is a consequence of fractional reserve banking? Our short answer to these questions is no. The mutual funds of the narrow banking world would be subject to the same runs. Indeed, recent research highlights that – in the presence of small investors – relatively illiquid mutual funds are more likely to face exit in the event of past bad performance. Thus, in practice, illiquidity plays the same role in a world of mutual funds with many investors as it does in the classic Diamond-Dybvig model of a bank run. And, without deposit insurance, the runs could be both more frequent and more devastating. Even modest declines in confidence, for reasons that are either real or imaginary, could readily turn into panics. (...) After this happened even once, people would simply flock to the narrow banks, and there would be no source of lending. That is, a financial panic in a system with narrow banks would devastate the credit intermediation process. (..) the government’s initial commitment to let the not-so-narrow funds fail in a crisis would not be credible, adding to the funds’ incentive to take on credit and liquidity risk and – contrary to the goals of narrow banking – raising the probability and cost of a future crisis.
financial_system  financial_crisis  banking  bank_runs  shadow_banking  NBFI  FDIC  liquidity  investors 
november 2014 by dunnettreader
Regulating Money Market Mutual Funds: An Update — Money, Banking and Financial Markets - July 2014
The SEC has finally acted(..) 859 pages of new rules for the operation of some money market funds. To summarize our reaction: we are underwhelmed! It is hard to see how the new rules will reduce systemic risk in any meaningful way. We first wrote about money market funds in May. The original post is here. (..) Let’s start by summarizing the new final regulation. It has three parts: 1) It applies to institutional prime money funds only. 2) These funds are required to have floating net asset values (NAV). 3) Fund boards will have the option to impose liquidity fees and redemption gates if the funds “weekly liquid assets” fall below a threshold. -- This new framework simply will not stop runs. Discretionary liquidity fees and redemption gates increase the risks of a run, not decrease them. Think about it. If you are worried that a fund you own is about to impose a 1% or 2% fee for withdrawals, would you wait around until they did it? What if you became concerned that the fund would suspend redemptions for the next two weeks? Rational, prudent, informed institutional investors will do exactly what we all expect: withdraw ASAP! -- good discussion of various recommendations and research, but it comes down to the MMFs are acting like depository institutions and should be required to maintain capital buffers and pay an FDIC fee. Liquidity fees might be imposed at all times across the board - probably wouldn't do much in a crunch but at least wouldn't create *incentives* for bank runs!
US_economy  financial_system  financial_crisis  banking  bank_runs  shadow_banking  NBFI  SEC  FDIC  capital_adequacy 
november 2014 by dunnettreader
Peter Lee - Lack of secondary market liquidity exacerbates sell-off | Euromoney magazine - Oct 17 2014
Lack of secondary market liquidity exacerbates sell-off by As equity markets have sold off and investors rushed into risk-free bonds, even supposedly liquid US treasuries have seen prices gapping. As volatility rises and investors focus on grim fundamentals, they see a broken bond-market structure. Amid the market turbulence this week as investors panicked about slowing growth in Europe and around the world, equity markets sold off sharply and panic-buyers drove down 10-year US treasury yields, market sources reported surprisingly thin liquidity, even in benchmark US government bonds. With dealers unwilling to position risk ahead of Fed stress tests and amid heightened regulatory reporting requirements on Volcker rule compliance, even in the supposedly most liquid bond markets prices gapped around.
capital_markets  bond_markets  banking  markets-structure  liquidity  financial_regulation  Volker_Rule  NBFI  shadow_banking  asset_prices  risk-systemic  risk_management  uncertainty  volatility 
november 2014 by dunnettreader
David Fiderer - Guest Post: A Review of Fragile By Design | Next New Deal - Nov 2014
There’s only one reason why The Big Lie seemed so plausible to so many people. The polite word for it is social stereotyping. -- Calomiris and Haber write “At the core of this bargain was a coalition of two very unlikely partners: rapidly growing megabanks and activist groups that promoted expansion of risky mortgage lending to poor and intercity borrowers, such as the Association of Community Organizations for Reform Now (ACORN).” They reference ACORN 11 times. -- And the GSEs did hold about $225 billion of the most senior tranches of private mortgage securities. Court filings and settlements indicate that most of the losses were caused by fraud -- When the GSEs were taken over by the government in September 2008, Fannie’s serious delinquency rate was 1.36%, well below levels seen in the mid-1980s. And Freddie’s serious delinquency rate, 0.93%, was lower than the lowest national average ever recorded by the Mrtg Bnkrs Assoc. According to the MBA, the nationwide serious delinquency rate as of June 30, 2008 was 4.5% For subprime mortgages it was almost 18% -- The irony is rich. This private label securitization system was built over decades, and at every step of the expansion of this predatory and abusive lending system conservative economists were there lending support. Calomiris in particular was an active participant, fighting against any prohibition against single premium credit insurance, opposing prohibitions on loans based on housing collateral that disregarded a borrower’s ability to repay, and writing in 1999 that 125 percent LTV lending was no big deal.
books  reviews  kindle-available  economic_history  financial_system  financial_regulation  financial_crisis  Great_Recession  housing  banking  securitization  GSEs  right-wing  bad_economics  bad_history  capital_markets  shadow_banking  NBFI  EF-add 
november 2014 by dunnettreader
Tobias Adrian, Emanuel Moench, and Hyun Song Shin - Leverage Asset Pricing | Federal Reserve Bank of New York - Staff Reports Number 625 - September 2013
We investigate intermediary asset pricing theories empirically and find strong support for intermediary book leverage as the relevant state variable. A parsimonious dynamic pricing model that uses detrended broker-dealer leverage as a price of risk variable, and innovations to broker-dealer leverage as pricing factor is shown to perform well in time series and cross sectional tests of a wide variety of equity and bond portfolios. The model outperforms alternative intermediary pricing specifications that use intermediary net worth as state variables, and performs well in comparison to benchmark asset pricing models. We draw implications for macroeconomic theories. -- cited in Report 690, September 2014 re forecasting US recessions and predictive power of broker-dealer margin accounts -- downloaded pdf to Note
paper  Fed  financial_system  intermediation  capital_markets  money_market  NBFI  shadow_banking  leverage  asset_prices  risk  risk_premiums  macroprudential_policies  downloaded  EF-add 
october 2014 by dunnettreader
Tobias Adrian and Nellie Liang - Monetary Policy, Financial Conditions, and Financial Stability | Federal Reserve Bank of New York - Staff Reports Number 690 - September 2014
In the conduct of monetary policy, there exists a risk-return trade-off between financial conditions and financial stability, which complements monetary policy’s traditional trade-off between inflation and real activity. The trade-off exists even if monetary policy does not target financial stability considerations independently of its inflation and real activity goals, because risks to future financial stability are increased by the buildup of financial vulnerabilities from persistent accommodative monetary policy when the economy is close to potential. We review monetary policy transmission channels and financial frictions that give rise to this trade-off between financial conditions and financial stability, within a monitoring program across asset markets, banking firms, shadow banking, and the nonfinancial sector. We focus on vulnerabilities that affect monetary policy’s risk-return trade-off, including 1) pricing of risk, 2) leverage, 3) maturity and liquidity mismatch, and
4) interconnectedness and complexity. We also discuss the extent to which structural and time-varying macroprudential policies can counteract the buildup of vulnerabilities, thus mitigating monetary policy’s risk-return trade-off. -- downloaded pdf to Note
paper  Fed  US_economy  macroeconomics  financial_system  monetary_policy  financial_stability  macroprudential_policies  macroprudential_regulation  money_market  capital_markets  banking  shadow_banking  NBFI  investors  institutional_investors  credit  risk_premiums  leverage  money_supply  monetarism  interest_rates  business_cycles  demand-side  investment  consumer_demand  open_market_operations  downloaded  EF-add 
october 2014 by dunnettreader
International Banking Research Network | Home (on NY Fed site)
The International Banking Research Network (IBRN) brings together central bank researchers from around the world to analyze issues pertaining to global banks. It was established in 2012 by Austrian, German, U.S., and U.K. researchers who saw a need for joint analysis of key questions, such as the role of cross-border banking in the transmission of financial shocks. The group has now expanded to include economists and analysts from a broad group of central banks, as well as the Bank for International Settlements and the International Monetary Fund. -- links to their research work and resources on banking, international finance, regulatory matters. Interesting it's not done under BIS auspices - has both BIS and IMF participation, but not World Bank or Financial Stability Board?
website  international_finance  banking  cross-border  financial_regulation  banking-universal  central_banks  financial_crisis  liquidity  leverage  contagion  shadow_banking  NBFI  capital_markets  money_market  monetary_policy  capital_adequacy 
october 2014 by dunnettreader
Sunanda Sen - The Meltdown of the Global Economy: A Keynes-Minsky Episode? - Working Paper No. 623 | Levy Economics Institute | September 2010
The paper begins with some theoretical concerns relating to factors that could trigger a crisis similar to the global economic crisis that began in 2008. The first concern relates to the deregulated financial institutions and the growing uncertainty that can be witnessed in these liberalized financial markets. The second relates to financial engineering with innovations in these markets, simultaneously providing cushions against risks while generating flows of liquidity that remain beyond the conventional sources of bank credit. Interpreting the role of uncertainty, one can observe the connections between investment and finance, both of which are subject to changes in the state of expectations. The initial formulation can be traced back to Keynes’s General Theory, where liquidity preference is linked to asset prices and new investments. The Keynesian analysis was reformulated in 1986 by Minsky, who introduced the possibility of sourcing external finance through debt, which further adds to the impact of uncertainty. Minsky’s characterization of deregulated financial markets considers the newfangled sources of nonbank credit, especially with the involvement of banks in the securities market under the universal banking model. As for the institutional arrangements that provide for profits on transactions, financial assets bought and sold in the primary market as initial public offerings of stocks are usually transacted later, in the secondary market, where these are no longer backed by physical assets.In the upswing, finance creates a myriad of financial claims and liabilities, and thus becomes increasingly remote from the real economy, while innovations to hedge and insulate assets continue to proliferate in the financial market, especially in the presence of uncertainty. The paper looks especially at the US. This is appended by a stylized account of the turn of events in terms of a theoretical model that highlights the role of uncertainty in the process. -- Associated Program: Monetary Policy and Financial Structure -- downloaded pdf to Note
paper  economic_theory  financial_crisis  bubbles  Great_Recession  financial_system  finance_capital  financialization  financial_innovation  banking  financial_regulation  derivatives  risk  risk-systemic  uncertainty  expectations  capital_markets  NBFI  intermediation  speculative_finance  securitization  Glass-Steagal  investment  investors  asset_management  real_economy  real_estate  Keynes  liquidity  Minsky  credit  debt  deleverage  leverage  asset_prices  banking-universal  disintermediation  money_market  Ponzi_finance  IPOs  secondary_markets  fragility  resilience  downloaded  EF-add 
october 2014 by dunnettreader
Philip Pilkington - Endogenous Money and the Natural Rate of Interest - Working Paper No. 817 | Levy Economics Institute - September 2014
Endogenous Money and the Natural Rate of Interest: The Reemergence of Liquidity Preference and Animal Spirits in the Post-Keynesian Theory of Capital Markets -- Since the beginning of the fall of monetarism in the mid-1980s, mainstream macroeconomics has incorporated many of the principles of post-Keynesian endogenous money theory. This paper argues that the most important critical component of post-Keynesian monetary theory today is its rejection of the “natural rate of interest.” By examining the hidden assumptions of the loanable funds doctrine as it was modified in light of the idea of a natural rate of interest — specifically, its implicit reliance on an “efficient markets hypothesis” view of capital markets — this paper seeks to show that the mainstream view of capital markets is completely at odds with the world of fundamental uncertainty addressed by post-Keynesian economists, a world in which Keynesian liquidity preference and animal spirits rule the roost. This perspective also allows us to shed new light on the debate that has sprung up around the work of Hyman Minsky, calling into question to what extent he rejected the loanable funds view of financial markets. When Minsky’s theories are examined against the backdrop of the natural rate of interest version of the loanable funds theory, it quickly becomes clear that Minsky does not fall into the loanable funds camp. -- Program: Monetary Policy and Financial Structure -- Related Topic(s): Capital markets Financial economics Financial market theory Macroeconomics Monetary economics Monetary theory
paper  economic_theory  intellectual_history  20thC  21stC  macroeconomics  monetarism  Post-Keynesian  money  interest_rate-natural  liquidity  capital_markets  EMH  monetary_policy  monetary_theory  banking  NBFI  savings  investment  investors  financial_system  finance_capital  financial_crisis  central_banks  uncertainty  Keynes  Minsky  downloaded  EF-add 
october 2014 by dunnettreader
Alan Moreira, Alexi Savov - Shadow banking and the macroeconomy | vox- 16 September 2014
The prevailing view of shadow banking is that it is all about regulatory arbitrage – evading capital requirements and exploiting ‘too big to fail’. This column focuses instead on the tradeoff between economic growth and financial stability. -- The last 2 decades have seen a dramatic rise in worldwide demand for safe and liquid securities, or money for short. These securities enable the large volume of transactions that course through the modern economy. Yet the supply of truly safe (typically government-backed) assets needed to back them has not kept up. Shadow banking has been making up the difference via money market funds, asset-backed commercial paper, and dealer repurchase agreements. The key feature of these instruments is that they function just as well as traditional money during quiet times, but they abruptly lose their liquidity at the first sign of trouble. -- In our paper, we show that the liquidity expansion enabled by shadow banking leads to a lower cost of capital for firms, greater investment, and a higher level of economic growth. Moreover, during a shadow banking boom, the economy moves up the risk-return frontier, funding riskier but more productive investments. Over time, this process builds up fragility. At the peak of a shadow banking boom, even a modest shock can set off a cascade of adverse events. -- they have a macro model that shows boom permits higher risk but productive investments - but their focus in the "trade-off" is on liquidity, not on maturity transformation, and it was the desire for safe medium to long term assets that fueled the mass production of dreck - too much was going to improperly priced (due to bubble and fraud) not productive -- need to separate money market and capital markets -- which they sort of do on Fed QE, but not on private sector financial manufacturing
international_finance  capital_markets  money_market  financial_crisis  bubbles  liquidity  intermediation  banking  NBFI  shadow_banking  Fed  QE  economic_growth  macroeconomics  business_cycles  financial_regulation  too-big-to-fail  financial_system-government_back-stop  lender-of-last-resort  deleverage 
september 2014 by dunnettreader
Eyes on Trade: A Deal Only Wall Street Could Love | Public Citizen - December 2013
Last week, US financial regulators took a step toward reining in some of the Wall Street risk-taking that led to the financial crisis by finalizing the Volcker Rule, designed to stop banks from engaging in risky, hedge-fund-like bets for their own profit. But this week, EU and US trade negotiators could move in the opposite direction, pursuing an agenda that could thwart such efforts to re-regulate Wall Street. Negotiators from both sides of the Atlantic are converging in Washington, D.C. this week for a third round of talks on the Trans-Atlantic Free Trade Agreement (TAFTA). What is TAFTA? A “trade” deal only in name, TAFTA would require the United States and EU to conform domestic financial laws and regulations, climate policies, food and product safety standards, data privacy protections and other non-trade policies to TAFTA rules. We profiled recently the top ten threats this deal poses to U.S. consumers. One area of particular concern is how TAFTA's expansive agenda implicates regulations to promote financial stability. Here's a synopsis. -- professionally done eviseration with lots of links
US_politics  US_economy  US_foreign_policy  Obama_administration  Congress  trade-policy  trade-agreements  EU  EU-foreign_policy  international_political_economy  global_governance  international_finance  financial_regulation  Transatlantic_Trade_and_InvestmentPartnership  FDI  banking  capital_markets  NBFI  shadow_banking  asset_management  derivatives  leverage  risk-systemic  financial_crisis  central_banks  macroprudential_regulation  too-big-to-fail  regulation-harmonization  cross-border  MNCs  tax_havens  investor-State_disputes  law-and-finance  administrative_law  race-to-the-bottom  lobbying  big_business  EF-add 
september 2014 by dunnettreader
TTIP: EU proposal will weaken regulation of banks | Corporate Europe Observatory - July 2014
A leaked document shows the EU Commission is spearheading a campaign for the interests of the financial sector at the negotiations with the US on a free trade and investment agreement (TTIP). The result could endanger reforms made since the financial crisis, and invoke another era of risky deregulation. The EU is going for a trade deal with the US that will weaken financial regulation on both sides of the Atlantic. That is the conclusion of Corporate Europe Observatory (CEO) and SOMO after taking a close look at the leak of a confidential EU proposal tabled at the negotiations by the European Commission in March 2014. The document follows long discussions between the EU and the US about whether the Transatlantic Trade and Investment Partnership (TTIP) is to include a specific mechanism on financial regulation. So far, the US has declined, allegedly out of fear that such a mechanism would weaken existing financial regulation and prevent future such reforms. -- downloaded pdf of leaked negotiating document to Note
Transatlantic_Trade_and_InvestmentPartnership  EU_governance  EU-foreign_policy  financial_regulation  regulation-harmonization  banking  derivatives  NBFI  shadow_banking  capital_markets  risk-systemic  international_political_economy  international_finance  trade-agreements  trade-policy  downloaded  EF-add 
september 2014 by dunnettreader
Leaked document shows EU is going for a trade deal that will weaken financial regulation | Corporate Europe Observatory
According to a leaked document, the EU is bent on using the TTIP negotiations with the US to get an agreement on financial regulation that, according to this analysis by Kenneth Haar of Corporate Europe Observatory (CEO) and Myriam Vander Stichele of The Centre for Research on Multinational Corporations (SOMO) will weaken reform and control of the financial sector. If the EU has its way, a final agreement between the EU and the US to establish a free trade and investment agreement the Transatlantic Trade and Investment Partnership (TTIP) will weaken regulation and raise obstacles to much needed reform of the financial sector. That is the conclusion after the leak of an EU proposal for so-called “regulatory cooperation” on financial regulation.1 tabled by the EU in March 2014. Regulatory cooperation is a continuous process of ironing out disagreements and differences between the two Parties to ensure agreement on what constitutes legitimate regulation – which in this case, would serve the interests of the financial industry. In the document, the EU suggests a number of mechanisms that will both scale back existing regulation, and prevent future regulation that might contradict the interests of financial corporations from both sides of the Atlantic. The leak follows news that EU negotiators have increased political pressure on the US to accept negotiations on “financial regulatory cooperation", which the US negotiators have so far refused. -- lengthy analysis with tons of links to coverage of the issues in financial press -- downloaded pdf to Note
US_politics  US_economy  US_foreign_policy  Obama_administration  EU  EU_governance  Transatlantic_Trade_and_InvestmentPartnership  financial_system  financial_regulation  international_finance  banking  capital_markets  NBFI  leverage  too-big-to-fail  bailouts  derivatives  lobbying  regulation-harmonization  cross-border  trade-agreements  trade-policy  MNCs  transparency  accountability  civil_society  central_banks  downloaded  EF-add 
september 2014 by dunnettreader
ESMA website section - Markets/ Post-trading and Settlement (SFD, CSDR, T2S) | ESMA
ESMA’s main roles in the post-trading area are implementing regulations on the EU’s markets infrastructure (EMIR) and central securities depositories (CSDR), co-ordinating issues such as settlement discipline and Target2-Securities (T2S), and providing information on the Settlement Finality Directive (SFD). **--** Section 1 - Clearing and reporting (EMIR), which covers ** Trade reporting ** Trade repositories (TRs) ** OTC derivatives and clearing obligation. ** Central Counterparties (CCPs) ** Non-financial counterparties (NFCs) ** Third (non-EU) countries **--** Section 2 - Settlement (SFD, CSDR, T2S), which covers ** Central securities depositories regulation (CSDR) ** Settlement Finality Directive (SFD) ** Target2-Securities (T2S)
website  EU  ESMA  financial_system  financial_regulation  risk-systemic  capital_markets  money_market  OTC_markets  clearing_&_settlement  markets-structure  infrastructure-markets  payments_systems  cross-border  NBFI  derivatives  equity-corporate  debt  macroprudential_regulation 
september 2014 by dunnettreader
Steven Maijoor, ESMA Chair, Keynote Speech - IBA Conference on the Globalisation of Investment Funds (Paris June 2014) | ESMA
A keynote address to the International Bar Association's 25th Annual Conference on the Globalisation of Investment Funds. The speech focused on concentrated on potential financial stability risks linked to the phenomenon of "too big to fail" and the fund management industry and also on policy developments affecting the fund management industry. **--* Excerpt -- "Addressing potential systemic risks in asset management will be an important part of our work going forward. As we develop our insights into the risks in the industry, it is clear that asset management has a specific profile that sets it apart from banking and other financial activities. This implies that the lens through which we see stability risks in banking and insurance, might not be the right one for asset management. Our proposal in this debate, therefore, is that in addition to looking at individual institutions, we must include in our analysis the very different types of activities of the asset management sector and their interdependence with systemic risks in the wider financial market." -- downloaded pdf to Note
speech  EU  ESMA  financial_system  financial_regulation  risk-systemic  capital_markets  money_market  financial_crisis  liquidity  intermediation  NBFI  shadow_banking  asset_management  banking  insurance  investors  concentration-industry  too-big-to-fail  bailouts  cross-border  regulation-harmonization  contagion  downloaded  EF-add 
september 2014 by dunnettreader
ESMA Working Paper 2 - The systemic dimension of hedge fund illiquidity and prime brokerage (June 2014) | ESMA
We analyse the potentially vulnerable and systemically relevant financial intermediation chain established by hedge funds and prime brokers. Our dataset covers the 306 largest global hedge funds and their prime brokers over the period July 2001 to December 2011. The study illustrates that hedge funds and prime brokers act as complementary trading partners in normal times. However, we observe that this form of financial intermediation may be severely impaired in times of market distress. This can be explained by the hoarding of liquid securities by prime brokers who are eager to avert runs by their clients. -- downloaded pdf to Note
paper  EU  ESMA  financial_system  financial_regulation  risk-systemic  capital_markets  money_market  financial_crisis  liquidity  intermediation  hedge_funds  markets-structure  NBFI  shadow_banking  OTC_markets  downloaded  EF-add 
september 2014 by dunnettreader
ESMA Working Paper 1 - Monitoring the European CDS market through networks: Implications for contagion risks (June 2014) | Esma
Based on a unique data set referencing exposures on single name credit default swaps (CDS) on European reference entities, we study the structure and the topology of the European CDS market and its evolution from 2008 to 2012, resorting to network analysis. The structural features revealed show bilateral CDS exposures describing growing scale-free networks whose highly interconnected hubs constitute both a strength and weakness for the stability of the system. The potential “super spreaders” of financial contagion, identified as the most interconnected participants, consist mostly of banks. For some of them net notional exposures may be particularly large relative to their total common equity. Our findings also point to the importance of some non-dealer/non-bank participants belonging to the shadow banking system. -- downloaded pdf to Note
paper  EU  ESMA  financial_system  financial_regulation  derivatives  markets-structure  risk-systemic  networks  networks-financial  capital_markets  NBFI  shadow_banking  OTC_markets  banking 
september 2014 by dunnettreader
ESMA Economic Report No. 1 - Retailisation in the EU - 2013
They look at higher yield, opaque retail products - "alternative" UCITS and structured products. Surprise, on a risk-weighted basis your plain vanilla bond index outperforms. And not just because of ...
report  EU  ESMA  financial_regulation  consumers  consumer_protection  NBFI  regulation-harmonization  regulation-enforcement  downloaded  from notes
september 2014 by dunnettreader
Trends, risks and vulnerabilities in financial markets - Annual Reports and Working Papers | ESMA
In order to safeguard financial stability it is necessary to identify, at an early stage, trends, potential risks and vulnerabilities stemming from the micro-prudential level, across borders and across sectors. Thereby particular attention is paid to any systemic risk posed by financial market participants, failure of which may impair the operation of the financial system or the real economy. ESMA monitors and assesses such developments in the area of its competence and, where necessary, informs the European Parliament, the Council, the Commission, the other European Supervisory Authorities and the ESRB on a regular and, as necessary, on an ad hoc basis. In cooperation with the ESRB, ESMA also initiates and coordinates Union-wide stress tests to assess the resilience of financial market participants to adverse market developments, and ensures that an as consistent as possible methodology is applied at the national level to such tests. In order to perform its functions properly, ESMA conducts economic analyses of the markets and the impact of potential market developments. On this basis, ESMA produces annually two reports on risk, trends and vulnerabilities.
report  paper  EU  ESMA  financial_system  financial_regulation  banking  NBFI  capital_markets  money_market  risk-systemic  markets-structure  market_integration  cross-border 
september 2014 by dunnettreader
Peer Review Report–Money Market Fund Guidelines - Divergence among national supervisory authorities | ESMA
The European Securities and Markets Authority (ESMA) has published a peer review report examining whether EU securities supervisors correctly apply ESMA’s guidelines on money market funds (MMFs). The review compared supervisory and enforcement practices for MMFs of 30 supervisory authorities across the European Economic Area (EEA). ESMA reviewed those 20 jurisdictions that had transposed the guidelines into their national rules. -- didn't download
report  financial_system  financial_regulation  NBFI  money_market  regulation-harmonization  EU  ESMA  cross-border  shadow_banking 
september 2014 by dunnettreader
Home -- European Securities and Markets Authority - ESMA [formerly CESR]
ESMA’s mission is to enhance the protection of investors and reinforce stable and well functioning financial markets in the European Union. ESMA, as an independent EU Authority, achieves this mission by building a single rule book for EU financial markets and ensuring its consistent application and supervision across the EU. ESMA contributes to the supervision of financial services firms with a pan-European reach, either through direct supervision or through the active co-ordination of national supervisory activity. -- successor agency as of January 2011 to the Committee of European Securities Regulators
website  government_agencies  administrative_agencies  administrative_law  EU  Europe  capital_markets  financial_regulation  regulation-harmonization  rating_agencies  equity-corporate  derivatives  markets-structure  market_integration  clearing_&_settlement  cross-border  corporate_finance  NBFI  disclosure  accounting  corporate_governance 
september 2014 by dunnettreader
Guonan Ma - Tweaking China’s loan-deposit ratio rule | Bruegel.org - 3 September 2014
Article highlights the need to revamp the country’s outdated banking regulatory framework ahead of full interest rate liberalisation -- In the wake of the latest easing of Chinese monetary policy, the CBRC, China’s banking regulator, has recently modified a few details of how it calculates the bank loan/deposit ratio, which is currently capped at 75 percent by the country’s banking law. This move, in combination with an easier monetary policy stance, aims to ease the tight Chinese financial conditions, allocate more credit to Chinese agriculture and SMEs, and adapt China to its rapidly changing financial landscape. The newly announced changes to the computation formula of the loan/deposit ratio fall into three categories, all in an apparent attempt to make the 75% cap less of a constraint on bank lending. -- comments on perverse incentives for big banks lending to large enterprises (probably continued issues around reducing state-owned enterprises)
China  banking  NBFI  shadow_banking  SMEs  financial_regulation  concentration-industry  competition-financial_sector  financial_sector_development 
september 2014 by dunnettreader
Future shape of banking - Time for reformation of banking and banks? (report) | PwC - 2014
Given the current economic climate, in particular the focus on the European Central Banks Comprehensive Assessment and the move to the Single Supervisory Mechanism, a working group from the PwC Response to the economic crisis in Europe (REcCE) network has developed a provocative point of view paper on the future shape and nature of banking services and of “banks” themselves. Future shape of banking outlines four key areas banks need to address in order to remain relevant, as we argue that the future of banking will look very different to what we see today and that while the need for banking services remains – traditional banks need to sharpen their strategic focus and regulators and regulation will also need to adapt.... adding up to a paradigm shift in the banking landscape. -- downloaded pdf to Note
international_political_economy  international_finance  international_monetary_system  banking  financial_regulation  financial_innovation  disintermediation  payments_systems  central_banks  tech  NBFI  liquidity  leverage  investors  downloaded  EF-add 
september 2014 by dunnettreader
James Kwak - Finance and Democracy | The Baseline Scenario - April 2014
Downloaded pdf to Note - Roger Myerson, he of the 2007 Nobel Prize, wrote a glowing review of The Banker’s New Clothes, by Admati and Hellwig, for the Journal of Economic Perspectives a while back. Considering the reviewer, the journal, and the content of the review (which describes the book as “worthy of such global attention as Keynes’s General Theory received in 1936″), it’s about the highest endorsement you can imagine. - long useful review, but leaves out 20 years of disintermediation history and development of capital and money markets pre Basle risk weighted capital and universal banking that got big banks back in the game
reviews  books  kindle-available20thC  economic_history  financial_system  financial_regulation  financial_crisis  Great_Recession  banking  leverage  risk  capital_markets  money_market  NBFI  downloaded  EF-add 
may 2014 by dunnettreader
Daniel Turillo - FRB: Speech--Tarullo, Rethinking the Aims of Prudential Regulation--May 8, 2014
....the aims and scope of prudential regulation have been fundamentally redefined since the financial crisis. Most significantly, a concern with financial stability and an increased emphasis on macroprudential regulation have informed major changes in both banking law and supervision. This salutary shift in perspective has important implications for prudential regulation. One is that prudential regulation must deal with threats to financial stability whether or not those threats emanate from traditional banking organizations. Hence the need to broaden the perimeter of prudential regulation, both to certain nonbank financial institutions and to certain activities by all financial actors. A second implication--to which I will devote most of my remarks this morning--is that the aims of prudential regulation for traditional banking organizations should vary according to the size, scope, and range of activities of the organizations. By specifying these aims with more precision, we can shape both a more effective regulatory system and a more efficient one.
financial_regulation  banking  shadow_banking  Fed  NBFI  financial_crisis  macroprudential_policies 
may 2014 by dunnettreader

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