The Role of the State in Managing and Forestalling Systemic Financial Crises: Some Issues and Perspectives

This paper reviews recent state interventions in financial crises and draws lessons for crisis management. A number of areas are identified where crisis management could be strengthened, including with regard to the tools and instruments used to involve the private sector in crisis resolution (with a view to reducing the recent enhanced role of official bailouts and the associated moral hazard), to allow for the orderly resolution of systemically important financial firms (to make these firms "safe to fail"), and with regard to achieving better integration with ex ante macroprudential surveillance. The paper proposes the establishment of high level systemic risk councils (SRCs) in each country with responsibility for overseeing systemic risk in both tranquil times and crisis periods and coordinating the activities of key government ministries, agencies, and the central bank.global financial crisis; state intervention; macroprudential surveiilance; crisis resolution; prevention

Liquidity, financial crises and the lender of last resort – How much of a departure is the sub-prime crisis?

Liquidity risks are endemic to banks, given the maturity transformation they undertake. This gives rise to risk of bank runs, the first line of defence against which should be appropriate liquidity policy of banks. Nonetheless, solvent banks can face liquidity difficulties at times of stress, necessitating liquidity support. The traditional role of the lender of last resort (LOLR) is to avoid unnecessary failures that could threaten systemic stability, while ensuring that there are suitable safeguards for central bank balance sheets and that moral hazard is minimised. The sub-prime crisis has shown that traditional models of bank liquidity risk and of LOLR require revision, as was already apparent to a lesser extent in the Russia/LTCM episode. Funding risk now interacts with market liquidity risk, to create difficult challenges for central banks. The LOLR has had to adapt radically, for example, in terms of lending to investment banks, taking lower quality collateral and lending for longer maturities. Central banks have also been challenged by difficulties in maintaining confidentiality of support and by the interaction of these problems with low levels of deposit insurance

The lender of last resort and liquidity provision: How much of a departure is the sub-prime crisis?

The traditional role of the lender of last resort (LOLR) is to avoid unnecessary bank failures that could threaten systemic stability, while ensuring that there are suitable safeguards for central bank balance sheets and that moral hazard is minimised. The sub-prime crisis has shown that traditional models of bank liquidity risk and of LOLR require revision, as was already apparent to a lesser extent in the Russia/LTCM episode. Funding risk now interacts with market liquidity risk, to create difficult challenges for central banks. Even in the relatively non-systemic period up to September 2008, the LOLR had to adapt radically, for example, in terms of lending to investment banks, taking lower quality collateral and lending for longer maturities. Central banks have also been challenged by difficulties in maintaining confidentiality of support and by the interaction of these problems with low levels of deposit insurance. Since September 2008, although action has mostly been in line with traditional approaches for systemic crises, there have been some further adaptations in line with the systemic nature of the crisis, notably by the Federal Reserve acting as market maker or investor of last resort in illiquid securities markets

New order in banking

Corporate Governance in the Banking Sector; rozdziałThe fi nancial crisis has highlighted many areas of corporate governance failures system in banks. Currently, politicians, regulators, supervisors and environmental bodies are trying to create the foundations for a new order in banking. The article presents the key areas of identifi ed irregularities and new regulations introduced to tighten the system. The main focus is however is on the issue of ethical culture, which should become the cornerstone of the reforms and to shape the new rules of corporate governance in banks

Kajian Kritis: Pengaruh Capaian Pendidikan Pns terhadap Efektivitas Pemerintahan dan Pertumbuhan Ekonomi

This paper is a critical review of a research conducted by Arezki & Quintyn (2013) in the Finance & Development, IMF. Their research is important because it is a pioneer research linking educational attainment by the civil servants to the effectiveness of government that affects economic growth. The research found the quality of education of civil servant is associated with higher state governing capacity, resulting in better decision, and ultimately better development outcome. As a preliminary study, it provides new insights on the importance of improving the quality of civil servants. In the methodology, this study also presents more appropriate technique for measuring the quality of education. It used as weights a countrywide academic ranking from university where civil servants obtain their degree as proxy of quality of education. This technique is better than computing a weighted average of officials\u27 years of education. On the other side, the research also have weaknesses, especially in the data and the statistical methodology. The data comes from the IMF training applicants\u27 CV and all of them work in central banks and ministries of economy and finance. Consequently, the data can not represent the entire civil servants in 178 countries studied. The following weakness is the use of correlation methods to see causality. This paper also shows that based on the data of civil servants in Indonesia, it is difficult to conclude these findings can be applied in Indonesi

Vascular changes after vitrectomy for rhegmatogenous retinal detachment: optical coherence tomography angiography study

Purpose: To analyse the postoperative foveal avascular zone (FAZ) area, superficial vessel density (SVD) and deep vessel density (DVD) and their correlation with functional (best-corrected visual acuity, BCVA) and anatomical outcomes (foveal macular thickness, FMT) after surgery for rhegmatogenous retinal detachment (RRD) repair. Method: Patients with RRD eyes, successfully treated with a single pars plana vitrectomy (PPV) with gas tamponade and a minimum 12 months follow-up, were re-examined. Foveal avascular zone (FAZ) area, SVD, DVD and FMT were evaluated by using optical coherence tomography angiography (OCTA) and compared to fellow eye. Results: Fifty-six patients with macula-on and 37 with macula-off RRD were included in the study. In both groups, no difference in FMT and FAZ area was found compared to fellow eyes. In macula-on RRD eyes, a lower parafoveal DVD (p = 0.001) was detected; FAZ area was related to FMT (p = 0.025), and the postoperative BCVA was correlated with parafoveal DVD (p = 0.010) and FAZ area (p = 0.003). In macula-off RRD eyes, lower parafoveal SDV (p = 0.012), and foveal and parafoveal DVD (p = 0.012 and p < 0.001, respectively) were observed. BCVA was related to FAZ area (p = 0.012), foveal SVD (p = 0.005) and parafoveal DVD (p = 0.010). Conclusion: Rhegmatogenous retinal detachment eyes successfully treated with PPV had lower vessel density in the superficial and deep retinal plexus compared to fellow healthy eyes; BCVA was related to FAZ area and vessel density

The Evolving Financial System and Public Policy: Conference Highlights and Lessons

At the 12th annual Bank of Canada economic conference, held in Ottawa on 4 and 5 December 2003, representatives from various public and private organizations and Bank of Canada staff discussed papers presented on three key issues affecting the financial system: financial contagion, the implications of bank diversification, and financial sector regulation. Papers on financial contagion studied the effect of globalization on Canadian foreign-asset exposures, developed a general-equilibrium model of a competitive interfirm lending market in which firms can borrow or lend, and used market-based indicators to determine the probability that contagion can be generated by interbank exposures. The papers on bank diversification focused on the links between the changing behaviour of financial institutions and risk-return trade-offs. Issues of financial sector regulation included the relationship between governance and financial sector soundness, the theoretical basis of bank regulations for capital requirements, and the implications of bank capital requirements for the transmission of monetary policy. A panel discussion provided extended discussion of the conference papers.

Does Compliance with Basel Core Principles Bring Any Measurable Benefits?

We explore the relationship between banking sector performance and the quality of regulation and supervision as measured by compliance with the Basel Core Principles for Effective Banking Supervision (BCP). Using BCP assessment results for 65 countries and 1998-2002 panel data for other variables, we find a significant positive impact of higher compliance with BCP on banking sector performance, as measured by nonperforming loans and net interest margin, after controlling for the level of development of the economy and the financial system and macroeconomic and structural factors. Copyright 2006, International Monetary Fund

The evolution of the financial crisis of 2007–8

The financial crisis that started in August 2008 reached a climax in the autumn of 2008 with a wave of bank nationalisations across North America and Europe. Although banking crises are not uncommon, this is the largest since 1929–33. This paper discusses the build-up to the crisis, looking at the role of low real interest rates in stimulating an asset price bubble. That bubble was stocked by financial innovation and increases in lending. New financial products were not stress tested and have failed in the downturn. After discussing the bubbles we look at the collapse of the complex asset structure, and then put the crisis in the context of the literature. The paper concludes with a discussion of policy implications of the crisis, and advocates a significant improvement in the regulatory structure

Financial Turmoil in the Banking Sector and the Asian Lamfalussy Process: The Case of Four Economies

This paper investigates the prevailing financial regulatory structures and impact of the current financial turmoil on banking performance in four economies: the People's Republic of China (PRC); Hong Kong China; Singapore; and Taipei,China. Both the PRC and Hong Kong, China operate under a fragmented financial regulatory structure, while Singapore and Taipei,China have integrated structures. We examine the role of an integrated financial regulatory structure in helping financial institutions mitigate the impact of the financial crisis, using financial indicators of banks' capital structure and operating performance in these four economies between 2003 and 2008. Our analysis of the indicators reveals that banking performance under a fragmented financial regulatory structure is not worse than under integrated regulation. This implies that financial regulatory structure is not the main reason why Asian financial institutions suffered only limited losses from the current global financial crisis. However, given the growing complexity of the global financial system, and the relative weakness of current financial regulatory structures in Asia, this paper suggests that East Asian governments should refer to the Lamfalussy Process in the European Union and set up an Asia Financial Stability Dialogue to facilitate policy coordination for regional financial sector stability and development.asian financial regulation; global financial crisis; asian banking; prc; asian financial institutions; asian financial sector