Financial crisis
Icelandic paper finds ‘striking’ ties between financial cycle and real economy
Authors identify strong financial cycle linked to global factors, which impacts macro variables including consumption and government spending; paper suggests range of policy responses
US enforcement actions stopped worse borrowing terms during subprime crisis, paper argues
Researchers compile database matching US enforcement actions to banks and their loans; price, duration and size of loans improved following enforcement actions, they argue
Bank of Mauritius constantly ‘beefing up’ regulatory capacity, says governor
Post-financial crisis ‘awakening’ posed challenges for authorities, says Roi; updating regulatory and supervisory capacity is ‘never-ending’
ECB paper compares ability of indicators to predict bond risk premia
Researchers assemble 132 macroeconomic indicators and compare their performance against financial measures as predictors of eurozone countries’ bond risk premia
ECB paper explores capital-based macroprudential measures
Dampened credit and asset price growth can have a “sizable” impact on predicted crisis probabilities, authors note; they present an early warning global autoregressive model
Orphanides: governments should rein in ‘immense power’ of central banks
Central bank balance sheets give them power to dramatically affect the distribution of wealth, undermining democracy, former Central Bank of Cyprus governor argues
Irish paper proposes three-phase model of volatility in bond markets
Irish paper finds ‘good’, ‘bad’ and ‘ugly’ phases in eurozone sovereign debt markets from 2003 to 2014; crisis not caused by changes to the shock mechanism, but by pre-existing cross-country links
BIS: Central banks playing for 'high stakes' as financial cycles turn
Central banks need to lean against financial cycles but fiscal policy should come to their aid, BIS says; cycles may be turning in opposite directions in advanced and emerging economies
Negative rates fail to dent Danish bank profitability
National Bank of Denmark concerned banks may be pursuing return targets too aggressively, as profits hit highest level since 2008 crisis; banks reshaping business models to avoid low-rate impact
Micro factors affect Italian banks’ sovereign debt purchases, paper argues
Italian banks’ sovereign debt purchases strongly affected by their balance sheet needs, Bank of Italy researchers argue; size of bank a key factor
ECB papers take detailed look at bond market data
Two papers from the European Central Bank take a detailed look at data on the development of credit spreads in eurozone corporate bonds
Structural funding ratios could have helped detect failing banks – BoE working paper
Bank of England working paper reveals structural funding ratios could have helped detect which banks were likely to fail in the 2008 crisis; wholesale funding structures most prone to failure
BIS’s Tissot says micro data can plug macro gaps
Data is abundant in many areas, but making micro data work with macro is still proving tricky for statisticians, says BIS head of statistics
Now banks face bail-in, should we rethink deposit insurance?
David Mayes argues deposit insurance schemes forged during crisis may impose unnecessary costs in more normal times
Paper examines credit risk spillover in the eurozone
Estimations of fair-value credit default swap values may give better picture of eurozone risk contagion than market prices for credit default swaps, ECB paper argues
Researchers conduct ‘horse race’ of financial crisis early-warning models
Statistical approaches based on machine learning appear to offer more robust early warnings of financial crisis than models based on more conventional techniques, two researchers say
Zeti Akhtar Aziz on crisis management, mandates and capacity building
Bank Negara Malaysia governor Zeti Akhtar Aziz speaks to Christopher Jeffery about her three-and-a-half decades spent tackling crisis management, capacity building and governance
Book notes: Lehman Brothers: a crisis of value, by Oonagh McDonald
McDonald's book offers a useful synopsis of the multiple failings at Lehman Brothers running up to 2008, but ultimately fails to add significantly to what was already known
BoE paper seeks unified global approach to NPLs
A multidisciplinary approach to legal, accounting, statistical, economic and strategic elements of loan loss provisioning and NPLs
ECB paper models influence of financial fragmentation on eurozone crisis
Working paper published by ECB models the influence of financial fragmentation on three key stages in the eurozone crisis
Central Bank of Kenya creates lending facility in wake of banking troubles
Emergency liquidity offered to any bank under pressure “from no fault of its own”, as fears mount over the resilience of Kenya's banking sector
Summers: Fed is not ready for next crisis
Secular stagnation has left Federal Reserve short on firepower as the next recession looms, economist says; urges greater willingness to risk inflation overshoot and action by fiscal authorities
Policy-makers could use fraud patterns as economic indicator – paper
Positive relationship exists between bank fraud and the macroeconomy, Chicago Fed risk specialist finds, suggesting fraud could offer an early warning sign of crisis
Rajan and Mishra lay down rules of the monetary game
Authors warn current models may display the policy biases of those who built them, calling for better dialogue and analysis of monetary policy spillovers