Financial Stability
FSB offers China advice on tackling shadow banking risks
Peer review team led by BoE’s Jon Cunliffe recommends establishing an inter-agency group to coordinate surveillance, among other measures designed to reduce shadow banking risks
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
Bank of Russia steps up withdrawal of banking licences
Russia’s central bank has increased the number of licenses it withdraws from banks and insurance companies, which one analyst attributes to widespread systemic problems
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
BIS’s Shin on international co-operation, inflation targeting and integrating finance into economics
BIS head of research talks to Daniel Hinge about opportunities for international co-operation, integrating finance and macroeconomics, and whether anyone is listening to the institution’s advice.
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: The Great Divide, by Joseph E Stiglitz
Stiglitz’s new book argues that deregulation was an important cause of the recent banking crisis
Book notes: Efficiently Inefficient: How Smart Money Invests and Market Prices are Determined, by Lasse Heje Pedersen
A book that offers a condensed picture of hedge funds’ operations and strategies, written by a person with considerable academic and practical experience
Book notes: The Lion Wakes: A Modern History of HSBC, by Richard Roberts and David Kynaston
A weighty tome, commissioned by HSBC to commemorate its 150th anniversary
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
Greek memo reveals commitments necessary to access bailout funds
Leaked document shows string of ‘prior actions’ government must complete before it can access up to €86 billion of euro funds
Bank of Russia presses ahead with rating agency plans
Russian central bank governor Elvira Nabiullina says banking sector is ‘safe’ and economy will soon have its own financial ratings agency and electronic payment system
UK regulators spare Co-op Bank £120m fine
Bank of England and FCA ‘censure’ the troubled bank for multiple failures including not being open with regulators, but drop a £120 million fine on financial stability grounds
Change to broken benchmarks years away, say industry commentators
After the FCA produced a review criticising banks for not learning the lessons of Libor and forex, observers predict no major benchmark reform until efforts co-ordinated with industry
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
CLS develops cleared FX settlement service with LCH.Clearnet
Designed specifically for central counterparties and cleared FX products, the service aims to minimise risk in the industry
Bank of Canada paper flags risk of spillovers from emerging to developed economies
Researchers show how a search for safe assets could transmit instability to developed economies as capital flows out of emerging markets
End of sanctions could be double-edged sword for Iranian banks
Iran central bank vice-governor warns domestic banks have work to do before they are opened up to international competition, but Iranian investors see end of sanctions as broadly positive
Lobbying softens regulatory treatment of distressed banks in US, paper finds
Under-capitalised US banks are less likely to be rigorously supervised if they have exercised political or regulatory influence, a working paper published by the ECB finds
Swedish deputy wants macro-pru tools for non-banks
Policy-makers must develop new macro-prudential tools for addressing risk in the non-banking sector, warns Sveriges Riksbank’s Cecilia Skingsley
ECB researchers examine flight to safety during sovereign debt crisis
Working paper tracks geographical distribution of capital flight, finding different movements by intra-eurozone and external investors; movements ceased when OMTs were unveiled
Spanish paper puts crisis legacy into context
Working paper suggests long-run trends in population and productivity growth could hamper the ability of policy-makers to address the legacy of the crisis
BIS economists warn of emerging market policy dilemma
Emerging markets are increasingly exposed to monetary policy in developed economies, transmitted via lower long-run rates, and it is not clear what central banks can do about it