Financial crisis
Managing financial stability, monetary systems and the economic order
If policy-makers fail to address the challenges presented by strong feedback loops between the economic and monetary systems, the next crisis could seriously damage faith in market-based economies
Book notes: Money and Trade Wars in Interwar Europe, by Alessandro Roselli
Alessandro Roselli’s book on interwar Europe should be compulsory reading for all those who are handling or interested in the current crisis in the euro area
Icelandic paper looks for early-warning signals across past crises
Working paper identifies six clusters of financial crises in the country since 1875; finds macroeconomic variables give a ‘more robust warning signal’ than financial alternatives
Bundesbank research warns of risks from rising intraday interest rates
Discussion paper finds intraday rate rose from zero to around 60 basis points after 2008 and sovereign debt crises; researchers suggest it is reflecting a liquidity premium
Bundesbank research tracks changing financial cycle
Discussion paper seeks to establish the ‘empirical regularities’ of the financial cycle using an econometric model, finding the cycle has grown longer and more severe over time
Greek lessons for central banks acting as lenders of last resort
Is it appropriate for a central bank that also acts as lead financial supervisor to act as a lender of last resort at a time when its actions are becoming quasi-fiscal in nature? By Ludek Niedermayer
Belgian paper examines ‘crisis-proof’ services
Working paper finds ‘significant’ differences between the elasticity of goods exports and services exports with respect to GDP growth during the crisis
UK government launches plan to improve BoE governance
Bank of England Bill proposes changes to committee structure, adjustments to the Court, establishing new roles and axing old ones, and audits to assess value for money
ECB raises concerns over Greece’s draft resolution law
Hastily assembled legal opinion on draft law warns of possible detrimental effects on the Bank of Greece, including impact on independence, increased liability and ‘operational burden’
Greece uses bridge loan to repay IMF and ECB
Loan received today used immediately to repay debts, while government works to unlock full bailout; Ben Bernanke joins debate with criticism of German trade surplus
Bundesbank paper tracks causes of financial crisis balance sheet contraction
Working paper identifies characteristics and behaviour that had a dampening effect on German banks during the 2008 crisis, noting the importance of taking a nuanced view
Martin Wheatley resigns as FCA chief executive
FCA chief quits after it emerges the UK chancellor will not be renewing his term next year; worldwide search begins for successor
Iceland offers pension funds relief from capital controls
Pension funds will have access to a limited amount of foreign currency in an effort to smooth the transition as controls are lifted
Central banks cannot avoid fiscal impact, Bundesbank panellists warn
Academics and central bankers point to fiscal impact of monetary policy and lender of last resort function, raising the question of how much fiscal power central banks ought to wield
EBA calls for more risk-sensitive securitisation regulation
Opinion submitted to European Commission recommends end to ‘one-size-fits-all’ capital treatment of securitisations, with two-stage process to determine which should be subject to lighter touch
Iceland’s Guðmundsson plans post-capital controls monetary redesign
‘Inflation targeting plus plus’ would help the small, open economy to pursue independent monetary policy, insulated from violent capital flows, the Icelandic governor tells Central Banking
Haldane blames ‘dread risk’ for ultra-low rates
Exaggerated fear of catastrophic but rare events may be a factor behind stubbornly low interest rates, Bank of England chief economist says
Eurogroup calls emergency conference as Greece turns to ESM for help
Greece asks for two-year bailout programme from European Stability Mechanism, triggering yet another emergency Eurogroup meeting; ECB’s Cœuré admits exit from the euro is now possible
BIS calls for new paradigm in economic policy
Annual report argues broken international monetary system and low productivity reflects failure to ‘come to grips’ with how financial and real economies interact, domestically and globally
Chatham House paper tries to quantify Syrian economic breakdown
Devastation from war, displacement of millions and oil and gas production falling into the hands of Isis and Kurdish forces have combined to create economic disaster
Coats: Greece’s banking sector options
Warren Coats assesses the soundness of Greece’s banks and the future challenges for the banking system as a debt crisis looms; proposes an innovative solution to budget deficit
ECB paper tests systemic risk using ‘VAR for VaR’ model
Researchers use quantile regression in attempt to better account for outliers, which they say could have applications for stress testing
BoE report details ‘innovative’ liquidity insurance tool
Indexed long-term repos were introduced as part of liquidity facility upgrades after the global financial crisis, and are designed to automatically adjust to stress
Irish banks have returned to profitability but still need repairs, report finds
Central Bank of Ireland’s macro-financial review notes improvements in the banking sector, but high levels of non-performing loans are holding them back