The lender of last resort in the european single financial market

The paper examines challenges in effectively implementing the lender-of-last-resort function in the EU single financial market. Briefly highlighted are features of the EU financial landscape that could increase EU systemic financial risk. Briefly described are the complexities of the EU’s financial-stability architecture for preventing and resolving financial problems, including lender-of-last-resort operations. The paper examines how the lender-of-last-resort function might materialize during a systemic financial disturbance affecting more than one EU Member State. The paper identifies challenges and possible ways of enhancing the effectiveness of the existing architecture

Towards an EU Framework for Safeguarding Financial Stability

Finanzmarktkrise, Internationaler Finanzmarkt, Kapitalmarktliberalisierung, Wirtschafts-politische Wirkungsanalyse, Regulierung, EU-Staaten, Financial crisis, International finan-cial market, Financial liberalization, Economic policy analysis, Regulation, EU countries

Reform of the Global Financial Architecture

This paper examines the implications of the global financial crisis of 2007-10 for reform of the global financial architecture, in particular the International Monetary Fund and the Financial Stability Board and their interaction. These two institutions are not fully comparable, but they must work more closely in the future to help prevent global financial crises. To this end, the paper identifies institutional and substantive reforms separately and in their joint work that would be desirable and appropriate.International Monetary Fund, Financial Stability Board, Bank for International Settlements, Group of Twenty, banking supervision and regulation, financial crises, financial stability, financial reform

Portfolio Diversification, Leverage, and Financial Contagion

This paper studies the extent to which basic principles of portfolio diversification explain "contagious selling" of financial assets when there are purely local shocks (e.g., a financial crisis in one country). The paper demonstrates that elementary portfolio theory offers key insights into "contagion." Most important, portfolio diversification and leverage are sufficient to explain why an investor will find it optimal to significantly reduce all risky asset positions when an adverse shock impacts just one asset. This result does not depend on margin calls: it applies to portfolios and institutions that rely on borrowed funds. The paper also shows that Value-at-Risk portfolio management rules do not have significantly different consequences for portfolio rebalancing than a variety of other rules. Copyright 2000, International Monetary Fund

Defining Financial Stability and a Framework for Safeguarding It

Financial stability is as important a policy objective as maintaining monetary stability if economic growth and stability are to be achieved and sustained. A prerequisite for more effective official oversight is the development and implementation of a better framework for assessing the ability of the financial system to perform its key economic functions, i.e. matching needs of savers and investors, providing transactions and payments services; risk pricing, spreading, sharing, and management; and the production, processing, and monitoring of information. However, the ultimate goal is sustained economic growth, stability, and prosperity. The purpose of this paper is twofold: first, to discuss a definition of financial stability and a framework for policy analysis more closely aligned with economic processes and efficiency; and second, to examine the implications and challenges for assessing systemic risk and the safeguarding of financial-system stability.

Defining Financial Stability and a Framework for Safeguarding It

La estabilidad financiera es un objetivo de política tan importante como la estabilidad monetaria si se desea lograr y sostener el crecimiento y la estabilidad de la economía. Un prerrequisito para que la supervisión sea más efectiva es el desarrollo e implementación de un marco de evaluación de las funciones clave del sistema financiero: emparejar necesidades de ahorro e inversión, proveer servicios de pagos y transacciones, análisis de riesgo y su diversificación y gestión; y la producción, procesamiento y monitoreo de información. Sin embargo, el objetivo último de este sistema es el crecimiento económico sostenido, la estabilidad y la prosperidad. El propósito de este trabajo es doble: por una parte, discutir la definición de estabilidad financiera y el contexto para análisis de política más alineado con procesos económicos y eficiencia; por otra, examinar las implicancias y retos para entender el riesgo sistémico y formas de preservar la estabilidad del sistema financiero

Private finance and public policy

This paper articulates a logical foundation—drawn from disparate literatures—for understanding why safeguarding financial stability is an important economic policy objective. The paper also explains why private aspects of finance provide broader social economic benefits and have the characteristics of public goods. Unique aspects of finance are examined, as are the linkages between finance, money, and the real economy

European integration, exchange rate management, and monetary reform: a review of the major issues

Since the adoption of the Single European Act in 1986, doubts have been expressed about the ability of the European Monetary System as presently structured to ensure an efficient and effective monetary system for the single European market. The further adoption by the European Council (June 1989) of the Report on Economic and Monetary Union (the Delors report) moves the European Community towards even greater monetary integration. ; Policy discussions have focussed on perceived problems with the current institutional and political structure of the European Monetary System and its exchange rate mechanism. Some have stressed that the current system is inherently asymmetric in the sense that it places greater burdens of adjustment on countries whose currencies are in less demand. Others have stressed that the objectives of fixed exchange rates, free capital mobility, and the autonomy of national monetary policies cannot simultaneously be achieved. Others emphasize that not only is closer monetary policy coordination required but so is greater coordination in other policies including budgetary, tax, and trade policies. This paper reviews these and other issues relating to monetary integration in Europe. While the discussion attempts to highlight important aspects and implications of these issues, and attempts to present the many points of view, it does not attempt to resolve these issues.European Economic Community ; Foreign exchange rates ; Monetary policy

Defining Financial Stability

The main objective of this paper is to propose a definition of financial stability that has some practical and operational relevance. Financial stability is defined in terms of its ability to facilitate and enhance economic processes, manage risks, and absorb shocks. Moreover, financial stability is considered a continuum: changeable over time and consistent with multiple combinations of the constituent elements of finance. The paper also discusses several practical implications of the definition that should be considered when using it for policy analysis or developing an analytical framework.Financial stability;financial system, financial institutions, financial instability, financial markets, financial systems, financial services, international capital, social welfare, financial fragility, financial regulation, financial intermediaries, financial assets, financial contracts, financial market, financial sector, stock market crash, international capital markets, derivative, financial resources, market failure, bonds, equity markets, international financial system, stock market, economic welfare, moral hazard, financial economics, hedge