A Banker’s Perspective on the Financial Crisis

During the last several years Robert Amzallag as Senior Fellow at CIRANO has taken an active interest in the research and transfer activities undertaken by the Finance Group. He has suggested initiatives that would be relevant to the financial industry in Montreal, particularly in derivative products and concerning practical issues in governance at the director’s level. As the former President and CEO at BNP Paribas (Canada), Mr. Amzallag is certainly well placed to offer insightful commentary on the financial crisis that has preoccupied us over the last several months. Mr. Amzallag’s presentation combines a retrospective analysis of root causes of the crisis followed by some thoughts on what’s to come. As to causes, he isolates three trends that have been gathering force over several decades. These include the erosion of certain stabilizing factors, particularly in the credit market, that has lead to extreme concentrations of risk. Looking to the future, Mr. Amzallag cautiously explores the consequences of several scenarios or responses to the crisis. The first two represent the pursuit of policies reflecting established political sensibilities involving different degrees of government intervention. The third represents a more thoughtful re-appraisal of the different functions that the key players—governments, central banks, regulators and financial institutions —should pursue and should be left to pursue. We have also invited CIRANO Fellow Michel Magnan, Professor of Accounting at Concordia’s John Molson School of Business to present an overview of the controversy surrounding marking to market, an issue highlighted by Mr. Amzallag as an important aspect of the crisis. Professor Michel Magnan takes up the technical but crucial issue of whether fair-value accounting [FVA] was an inadvertent messenger of the financial crisis or was an actual contributor to the crisis. The point is far from academic. By way of appendices to these presentations, the Finance Group has prepared a graphic tool that permits the time-series presentation of key financial indicators against the historical background of the crisis. As well, we have prepared a primer on structured products, including synthetic CDOs, that have played a lead role in the current crisis. This presentation leads naturally to the software module developed at CIRANO that explores the risk management dimensions of these products.

From one crisis to another: a banker's perspective

Once the 2009 financial meltdown was avoided through central banks’ decisive action and governments’ swift bailouts, the general consensus was that the usual recipes that took us back to prosperity and growth after each of the post war recessions should undoubtedly work again. The main tools selected by the authorities were fiscal stimulus, lowering of interest rates combined with monetary easing, politically motivated legislation and high profile chastising to keep the public satisfied that the authorities were extirpating the roots of the problem. These remedies were applied and, for a while, seemed to work: stock prices recovered, the US job market stabilized, bail out money started to be repaid and economic growth, although sluggish, appeared to be well into positive territory. However, two years later, another serious financial crisis unexpectedly struck. There seemed to be no reason for it. Indeed, this had not been the first time we faced a real estate/financial crisis. For example, in 1990, real estate prices went down even more than they have had since 2008. The amounts dedicated to the stimulus packages and monetary easing were unprecedented and imposing pieces of legislation were quickly passed. So how could this have happened? The answer to this question requires a careful analysis of the nature of the 2008 crisis, the then prevailing economic conditions and the relevance of the measures taken.

The impact of regulating occupational pensions in Europe on investment and financial stability

This study examines the European Commission’s 2011 call for advice to the European Insurance and Occupational Pensions Authority (EIOPA) on the improvement of the Institutions for Occupational Retirement Provision (IORP) Directive (the “IORP Directive”). Specifically, it uses both the EIOPA final advice to the Commission and its quantitative impact study as a basis for answering the following questions: first, what would be the likely impact of the changes proposed to the IORP Directive, in particular minimum solvency requirements, the introduction of risk-based solvency capital requirements, on IORP investment strategies in the short and long term? Second, what would be the impact, if any, of these proposals on financial stability, in particular as regards possible pro-cyclical IORP investment behaviour? The main findings of the study are that the proposed solvency capital requirement framework could lead to IORPs shifting their investment allocations towards a greater proportion of “low-risk” asset classes. However, the impact is likely to vary extensively across EU countries, in line with national pension legislation, demographic profiles, the macro-financial situation and cultural preferences. Nevertheless, the study finds some empirical support to suggest that even the announcement of the proposed revisions, which have in the meantime been deferred, may already have led to some de-risking of some IORPs. Furthermore, some pro-cyclicality of IORPs’ investment strategies could be expected should these proposals be adopted, although the exact outcomes will depend on their precise calibration, especially regarding counter-cyclical adjustments

La crise financière vue par un banquier

Au cours des dernières années, Robert Amzallag, Fellow invité du CIRANO, s’est beaucoup intéressé à la recherche et aux activités de transfert menées par le Groupe Finance. Il a proposé des initiatives sur des sujets d’actualité touchant le marché financier de Montréal. Notamment à titre de Président et chef de la direction de BNP Paribas (Canada), Monsieur Amzallag est bien placé pour faire des observations éclairées sur la crise financière. La présentation de monsieur Amzallag consiste en une analyse rétrospective des causes fondamentales de la crise, suivie d’une réflexion sur les événements à prévoir. Pour ce qui est des causes, il isole trois tendances qui ont pris de l’ampleur au cours des dernières décennies. Ces tendances comprennent l’érosion de certains facteurs de stabilisation, particulièrement dans le marché du crédit, qui contribuent à des concentrations excessives du risque. Dans une perspective d’avenir, monsieur Amzallag explore les implications de trois scénarios ou réponses liés à la crise. Les deux premiers scénarios représentent l’application de règles de conduite reflétant les sensibilités politiques établies. Le troisième scénario consiste en une réévaluation sérieuse des différentes fonctions que les partenaires clés, gouvernements, banques centrales, organismes de réglementation et institutions financières, devraient assumer et devraient avoir la latitude nécessaire pour l’assumer. Nous avons aussi invité monsieur Michel Magnan, Fellow CIRANO et professeur à l’École de gestion John Molson, Université Concordia à présenter un survol de la controverse entourant l’évaluation des prix du marché, une question qui constitue, d’après monsieur Amzallag, un aspect important de la crise. Il examine les fondements théoriques et empiriques de la comptabilisation de la juste valeur [fair value accounting (FVA)]. D’après le professeur Magnan, il existe des preuves appuyant la théorie selon laquelle la FVA ne constitue pas seulement un messager, mais qu’elle peut avoir contribué à l’accélération de la crise. Dans les annexes qui suivent les interventions des invités, le Groupe Finance a préparé un graphique permettant de présenter des séries chronologiques des principaux indicateurs financiers par rapport au contexte historique de la crise. Nous avons également préparé une introduction aux produits structurés, incluant les obligations synthétiques adossées à des prêts (synthetic collateralized debt obligations - cdos), lesquels ont joué un rôle de premier plan dans la crise actuelle. Cette présentation nous amène naturellement à un module logiciel élaboré au CIRANO et qui explore les dimensions que prennent ces produits dans le cadre de la gestion du risque.

Technopoiesis in the Southern Levantine Metallurgy and Its Implications on the Rise and Fall of the Ghassulian Society

The impact of mental shifts on societal transformations in antiquity is frequently minimized due to the difficulty of evaluating them. However, even in the absence of written sources, some of these changes are traceable in the material culture, through a special type of implements produced for revealing the technique bringing them forth. Defined as processual artifacts, they inform us about the ‘juvenile phase’ of complex techniques with strong cosmological dimension (technopoiesis), their evolution, and their societal influences. This paper exposes the heuristic power of this approach through the analysis of the early metallurgy in the Southern Levant. It shows how the evolution of this craft and its cosmological resonances contribute to clarify the singularity of the Ghassulian culture and its disappearance during the transition to the Early Bronze Age

Vers une universalité des émotions : analyse de la capacité émotionnelle des vertébrés et invertébrés

Les études portant sur les émotions chez les vertébrés, les mammifères en particulier, sont abondantes et bien documentées. Toutefois, bien qu’on s’y intéresse de plus en plus, les émotions des invertébrés, elles, suscitent moins l’attention. À telle enseigne que, bien qu’ils composent 97 % du règne animal, les invertébrés sont les grands laissés-pour-compte des études sur la nature et les fonctions de leurs émotions (Willmer, 1990). Tout en donnant écho aux rarissimes études déjà réalisées, nous avons tenté au travers le présent mémoire de dissiper le doute quant à l’existence des émotions chez les invertébrés par deux moyens principaux : d’une part, en étudiant les émotions en tant qu’états émotionnels primaires ou émotions primitives, dépourvus de la dimension subjective normalement rattachée à l’étude des émotions et d’autre part, en analysant les circuits neuronaux, neurotransmetteurs et hormones, ainsi que les patrons d’expression comportementale typiquement associés aux émotions humaines. À travers cette nouvelle façon de conceptualiser les émotions, nos résultats suggèrent que les systèmes émotionnels neuronaux des vertébrés et invertébrés sont possiblement le fruit d’une évolution commune, qui aurait bifurquée il y a des millions d’années. En conséquence, nous concevons les états émotionnels comme universaux et présents dès la naissance.Studies of emotions in vertebrates, especially in mammals, are abundant and well documented. While researchers have expressed a growing interest to study emotions in invertebrates, they generally attract less attention. Although they account for 97% of the animal kingdom, the nature and functions of emotions in invertebrates have been largely overlooked (Willmer, 1990). By relating the rare studies that have been carried out by researchers, this thesis is meant as an attempt to dispel the doubts surrounding the existence of emotions in invertebrates by essentially two means: firstly, by studying emotions as central emotional states or emotion primitives, devoid of the subjective dimension as a defining feature of emotional process; and secondly, by analyzing the neuronal circuits, neurotransmitters and hormones, together with the behavioral patterns typically linked to emotions as a whole. Through this new conceptualization of emotions, our findings suggest that the neural correlates of emotions in vertebrates and invertebrates are possibly the result of a common evolution, which would have diverged millions of years ago. Thus, we promote emotion states as innate and universal throughout the animal kingdom

Effects of base-pair sequence, nicks and gaps on DNA minicircle shapes:analysis and experiment

DNA is a long polymer with the form of a double helix of about two nanometers diameter (2.10-9 meters). It is composed of nucleotides whose sequence carries the information of heredity. The four possible nucleotides have slightly different geometries, and their sequence along the DNA molecule are thought to influence the shape and the stiffness of the double helix on a scale of few tens to a few hundred base pairs, and thereby its biological activity. DNA minicircles (or miniplasmids) are closed loops with lengths of the order of a few tens or hundreds of base pairs in which the double helix bends around to close on its own tail with some number of twists. Its minimal energy shape and its energy of formation depend on the sequence of base pairs, and can be efficiently computed by polymer and rod models, if shape and stiffness parameters of DNA are provided as inputs. This structure is therefore an interesting experimental motif to test sequence-dependent mechanical properties of the DNA molecule. The purpose of this thesis is to explore the experimental methods to determine the shape and free energy of formation of DNA minicircles. The shapes have been be determined from cryo-electron micrographs. Efficiency of formation has been investigated by a novel method called annealing-cyclization. Cryo-electron microscopy allows observation of very small molecules (here 17 or 11 nm diameter) in vitrified water, in order to keep the 3D shape of the molecules as close as possible to the shape they had in solution. In Chapter 1, I used stereo cryo-electron micrographs to determine and compare the three-dimensional shape of 95 individual DNA minicircles of 158 base pairs, which were identical in sequence except within a 18 bp block which contained either a TATA box sequence or a CAP site. I defined the notion of shape-distance which I used to estimate the error of reconstruction, and I detected clusters of shapes using an appropriate sorting algorithm. However the cluster did not seem to be associated with the variable sequence (TATA or CAP). I then analyzed (in Chapter 2) two-dimensional shapes of shorter DNA minicircles (94 bp) determined by negative staining electron microscopy, designed with either two nicks (breaks in one of the strands) or two gaps (missing nucleotides) at diametrically opposite sites of the minicircles. I observed that the gapped minicircles have an elongated shape with respect to the nicked minicircles, and I used this result together with the results of atomic level molecular dynamics simulations to conclude that the gap flexibility, perhaps together with base unpairing at the gap site, is responsible for this elongated minicircle shape. Finally, I proposed a ligase-free assay to measure the minicircle formation efficiency, which can give a high yield of nicked minicircles. The method avoids the use of ligase and the associated concerns about the effect of ligase concentration on the measurements. I determined an equation from a chemical model of the reaction that fits the experimental data, and I defined the Ja factor which gives a measure of the cyclization yield independent of DNA initial concentration. This method seems to confirm that minicircles with two gaps cyclize more efficiently that minicircles with two nicks, probably because of the gap flexibility. As a perspective, the conclusions of this thesis could be used for the design of minicircle constructs whose shape would be sensitive enough to sequence mutation in order to be detected by electron microscopy. Such shapes could be then compared, thanks to the shape-distance tool defined herein, to shapes computed with known or putative DNA models

Edomite Defectors Among the Israelites - Evidence from Psalm 124

The present analysis of Ps 124 suggests that it relates the retreat to Israel of a foreign group of YHWH’s worshipers. Its Edomite identity emerges from its comparison with other Songs of Ascents (especially Pss 120, 122 and 129) and the Adam appellation of their land of origin (v. 2). The setting of Ps 124 in complex antiphony provides further details concerning their fleeing from Edom, their new commitment to Israel, and their Edomite brothers’ angry reaction. These events corroborate other biblical sources aiming for the integration of a group of Edomite poets and singers in the Jerusalem temple at the early Persian period. The consequences concerning the nature of the corpus of Songs of Ascents are discussed. https://doi.org/10.17159/2312–3621/2021/v34n1a