Bank Leverage Ratios and Financial Stability: A Micro- and Macroprudential Perspective

Bank leverage ratios have made an impressive and largely unopposed return; they are mostly used alongside risk-weighted capital requirements. The reasons for this return are manifold, and they are not limited to the fact that bank equity levels in the wake of the global financial crisis (GFC) were exceptionally thin, necessitating a string of costly bailouts. A number of other factors have been equally important; these include, among others, the world's revulsion with debt following the GFC and the eurozone crisis, and the universal acceptance of Hyman Minsky's insights into the nature of the financial system and its role in the real economy. The best examples of the causal link between excessive debt, asset bubbles, and financial instability are the Spanish and Irish banking crises, which resulted from nothing more sophisticated than straightforward real estate loans. Bank leverage ratios are primarily seen as a microprudential measure that intends to increase bank resilience. Yet in today's environment of excessive liquidity due to very low interest rates and quantitative easing, bank leverage ratios should also be viewed as a key part of the macroprudential framework. In this context, this paper discusses the role of leverage ratios as both microprudential and macroprudential measures. As such, it explains the role of the leverage cycle in causing financial instability and sheds light on the impact of leverage restraints on good bank governance and allocative efficiency

Financial crisis, contagion, and the British banking system between the world wars

In a globalised world, when financial crisis strikes, can countries which are well-integrated into the world financial system escape? Recent experience suggests not. In the early 1930s, Britain's openness at the centre of the world financial system left it vulnerable, particularly to the central European financial crisis. Yet there was no financial crisis in Britain in 1931, rather an exchange-rate crisis, and sterling left the exchange-rate regime of the gold exchange standard. The most important financial institutions, the joint-stock commercial banks, the central part of the payments system, remained robust and contributed to the stability of the British economy.globalisation, British banks, the 1930s, contagion, crisis, stability,

A fresh start and the learning experience of ethnic minority enterpreneurs

This paper focuses on ethnic minority entrepreneurs whose businesses failed within the first 3 years of trading, but were starting afresh with the help of the Brent Business Venture Fresh Start in Business programme. The paper aims to identify why the entrepreneurs had previously failed; what prompted them to start again; what was different about their business approach and practices second time around; and how key lessons had been learned as a result of their previous experiences that can improve their prospects for success in the future. The resultant insight derives out of an evaluation study of the Fresh Start programme, the methodology for which included initial telephone interviews with 20 ethnic minority entrepreneurs spread across eight business sectors, during which profile data were collected. The second phase of the study involved in-depth face-to-face and semi-structured interviews with the 20 entrepreneurs. The main findings suggest that failed entrepreneurs learn from their mistakes and actions embedded in the development processes and activities underpinning their first business venture attempt and are more successful second time around. The key learning processes and activities include learning from customer feedback, from interface with suppliers, from interaction with peers and from the fostering and facilitating inputs of provision such as the Fresh Start programme. The ability to learn by doing, problem-solving and opportunity-taking is important. The study concludes by highlighting key identified management capabilities which can improve the likelihood of new venture success, and in particular the value of giving future focus to the nature and form of effective strategic learning processes and activities that successful owner managers undertake and how these could be nurtured as part of the would-be entrepreneurs''management capabilities tool box'