Financial crisis
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
RBNZ proposes new powers over FMIs in times of crisis
Final crisis management plan proposal details two-tiered framework for FMIs; RBNZ and FMA would act if contingency plans not up to scratch
Economists still scrambling to adapt models to lower bound
Many traditional economic models perform poorly now major economies are near the effective lower bound, but economists at the RES annual conference offer a range of solutions
IMF will ‘take stock’ of capital flow policies
IMF may undertake further work on capital flow management and foreign exchange interventions if analysis highlights need for it; fund will also re-examine global safety net
BIS paper: short-term interest rate may no longer be enough to set policy
Globalised debt markets, the falling long-term interest rate and dollar debt accumulation has altered every major aspect of the monetary transmission mechanism in emerging markets, authors say
Networks did not spread 2008 shocks in eurozone money market, paper argues
Banking networks in the eurozone did not play a major role in spreading shocks in the financial crisis, ECB working paper argues; eurozone banks are ‘not network dependent’
Book notes: The end of alchemy, by Mervyn King
King’s book on how to fix everything that is wrong with the financial and economic system lays out radical proposals that deserve serious consideration
Mervyn King calls for radical banking reform
Former Bank of England governor wants to curtail banks’ use of maturity transformation, putting the central bank’s lender-of-last-resort role at the heart of his new banking system
Wholesale funding shocks hit credit supply, paper finds
Shocks to securities and interbank lending markets have significant effects on banks’ supply of credit, an ECB paper finds; researchers use monthly loan data for eurozone banks
Book notes: Stabilising capitalism: a greater role for central banks, by Pierluigi Ciocca
Pierluigi Ciocca offers an excellent, brief and crisp account of the main issues facing central banks today
End of sanctions offers chance to fix Iran’s banking sector
Iranian banks struggling with high levels of non-performing loans may see their situation improve, but deep reforms are needed and the political situation remains complex
Book notes: Between debt and the devil, by Adair Turner
Adair Turner offers a lively and well-structured account of his proposals to radically overhaul the financial sector