Financial crisis
Central Bank of Iceland approves failed bank plans
Central Bank of Iceland approves ‘composition agreements’ by failed banks, offering them the opportunity to duck a heavy stability tax
Emerging markets risk ‘quantitative tightening’, Caruana says
Problems now affecting emerging markets are a continuation of global problems, head of BIS says; response by policy-makers is too reactive and based on domestic circumstances
Bernanke offers insight into Fed’s political balancing act
Former Fed chair tells of navigating both political and economic pitfalls in crisis response, and says the US central bank’s independence is still under threat
Tightening bank loans explains much of ‘Great Recession’ in eurozone
Tightening bank loans and increases in bond premia explain much of the recent contraction in the eurozone, paper argues
Asymmetric credit growth drove pre-crisis eurozone imbalances, paper argues
Credit growth and competitiveness major causes of current account deficits, researcher says
External debt is Greece’s perennial Achilles heel, economists warn
Cycles of external debt and dependence are ‘perennial themes’ for Greek crises since 1829, and other countries may be similarly vulnerable, Carmen Reinhart and Christoph Trebesch argue
BoJ lifts lid on new approach to macro stress testing
Tests designed to measure system-wide impact of a ‘tail event’ on financial and economic stability, allowing comparisons over time; BoJ reveals underlying variables for first time
Repeat of Asian crisis ‘unlikely’, say Singapore bank chiefs
Policy-makers are responding more proactively to risks than in 1997, they say, while economies are seen as much stronger
Iosco, Asifma officials urge early global co-operation on future rules
Joining forces early on would improve regulatory cohesion between countries, but post-crisis pressure on national rule-makers to legislate poses problems, it is suggested at Hong Kong conference
Swap line availability not assured, warns Bill Allen
It is ‘not certain’ the Federal Reserve will be able to provide liquidity in the same manner in the future, Allen tells Central Banking
BIS paper offers method of overcoming time inconsistency in macro-prudential policies
Macro-prudential policies are necessary to prevent finance amplifying imbalances, but regulators struggle to credibly commit to policies, authors warn
Central Bank of Iceland delays report as tensions over failed banks rise
Central bank postpones launch of financial stability report at last minute, citing the need to wait for new information; governor responds to lobby group calling for heavier tax on failed banks
BoE paper explores link between mortgage debt and consumption
Tighter credit conditions and concern over debt repayments may have led to a 2% drop in aggregate private consumption following the crisis, working paper says
BIS paper uncovers new evidence on FX reserve and capital flow link
Paper argues role of domestic investors is key to properly understanding how foreign exchange reserves can dampen volatile capital movements
Trichet says banks must keep ‘hammering’ at their culture
Progress towards improving culture and behaviour at banks is uneven, and the G30 is calling on the laggards to catch up; Central Banking asked members what still needs to be done
Limited case for leaning against the wind, says IMF report
Staff conclude the short-term costs of using higher interest rates to address financial risks exceed the longer-term benefits in most cases, but stress door should ‘remain open’
SMEs possibly worst hit by fragmentation of monetary policy transmission, ECB paper finds
Small and medium enterprises may have suffered most from fragmentation in monetary policy transmission following the financial crisis, according to research
RBA’s Ellis sees gaps in understanding of credit and property price relationship
The Australian central bank's head of financial stability discusses what economists do and don’t know about the property market, highlighting areas that need more work
Safe as houses: designing a more stable mortgage
A conference at the New York Fed earlier this year looked at some innovative mortgage designs that could boost financial stability. Central Banking approached some of the speakers to learn more
Limited liability distorts incentives for disaster planning, paper argues
Consequences of recent events with catastrophic financial ramifications have been greatly aggravated by policy-makers’ failure to prepare, says ECB working paper
BoE economists mine tweets for early-warning indicator
Central bank put its work on ‘text mining’ and big data to work during Scottish independence referendum in an attempt to create an early-warning indicator for bank runs
Public support works when big and well-aimed, study finds
Large-scale public sector support operations for distressed borrowers work best when they are large and have strong conditionality, according to DNB paper
IMF paper finds standard risk metrics perform poorly with low financial depth
Authors find ‘excess credit’ is a better early warning indicator for financial instability than credit-to-GDP where countries have limited financial depth
Nobel economist Sims on fiscal stimulus, Eurozone loss sharing and role of central banks
The Nobel laureate speaks with Christopher Jeffery about his scepticism regarding secular stagnation, the eurozone’s failings and the need for inflationary fiscal stimulus at the zero lower bound