Part III Innovation and Trade-Finance Challengers, 16 Countertrade as Finance

2021 ◽  
Author(s):  
Hare Christopher
Keyword(s):  
Financial Stability ◽  
Institutional Framework ◽  
Financial Instability ◽  
Trade Finance ◽  
Letter Of Credit ◽  
Financial Products ◽  
Legal Difficulties

Whilst the letter of credit has been the dominant force in the trade-finance area, its utility has increasingly been challenged by technology, regulation, and competition from other financial products. Additionally, there are some circumstances where economic, political, or financial instability makes the letter of credit inapt. This is because the letter of credit requires a certain level of financial stability and an appropriate institutional framework to function properly. In such circumstances, the parties may resort to trade finance mechanisms that can withstand such instability. The prime example is countertrade, whereby goods or services are used to ‘pay’ for goods or services. Whilst this form of transacting is not without its legal difficulties, countertrade may provide a useful trade-finance device in times of crisis, such as the global coronavirus pandemic.

Part III Innovation and Trade-Finance Challengers, 14 Something Old, Something New: Open Account, Prepayment, and Supply Chain Finance

2021 ◽  
Author(s):  
Hare Christopher
Keyword(s):  
International Trade ◽  
Supply Chain ◽  
Trade Finance ◽  
Letter Of Credit ◽  
Payment Mechanism ◽  
Supply Chain Finance ◽  
Supply Chain Financing ◽  
Technology Competition ◽  
Legal Difficulties ◽  
Over Time

Letters of credit have increasingly come under strain as a payment mechanism in international trade as a result of increased technology, competition, and regulation. At the same time, the letter of credit’s efficiency has reduced over time as a result of its processing costs and speed. The space created by the decline of the letter of credit has been filled by trade parties turning to open account and prepayment terms, whilst using Supply Chain Financing (‘SCF’) techniques to provide the requisite liquidity. The advantages of such payment terms are principally their speed, convenience and cost, all of which the letter of credit increasingly lacks. Accordingly, it is unlikely that this trend towards SCF techniques will abate any time soon. Nevertheless, there are still legal difficulties associated with such payment and liquidity-enhancing techniques, as well as uncertainty associated with the regulatory and accounting treatment of these devices. If open-account trading and SCF techniques are going to eclipse the letter of credit as a payment mechanism, these challenges will have to be addressed.

An Historical Perspective on the Quest for Financial Stability and the Monetary Policy Regime

2018 ◽  
Vol 78 (2) ◽  
pp. 319-357 ◽  
Author(s):  
Michael D. Bordo
Keyword(s):  
Monetary Policy ◽  
Financial Crises ◽  
Financial Stability ◽  
Historical Perspective ◽  
Asset Price ◽  
Financial Instability ◽  
Historical Evidence ◽  
Policy Regime ◽  
Extreme Form ◽  
Credit Booms

This article surveys the co-evolution of monetary policy and financial stability for a number of countries from 1880 to the present. Historical evidence on the incidence, costs, and determinants of financial crises (the most extreme form of financial instability), combined with narratives on some famous financial crises, suggests that financial crises have many causes, including credit-driven asset price booms, which have become more prevalent in recent decades, but in general financial crises are very heterogeneous and hard to categorize. Moreover, evidence shows that the association across the country sample between credit booms, asset price booms, and serious financial crises is quite weak.

scholarly journals EVALUATION OF FUNCTIONAL PERFORMANCE OF THE BANKING SYSTEM OF UKRAINE IN CONDITIONS FINANCIAL INSTABILITY

2021 ◽  
Author(s):  
Nataliia Danik ◽  
Kateryna Novak ◽  
Anastasiia Yakovenko
Keyword(s):  
Economic Crisis ◽  
Financial Stability ◽  
Structural Changes ◽  
Banking Sector ◽  
Synergistic Effects ◽  
Banking System ◽  
Scientific Article ◽  
Financial Instability ◽  
Industrial Complex ◽  
The Impact

The article covers the problems of the functioning of the banking sector of Ukraine during 2018-2021, as one of the main sectors of the financial market and the national economy as a whole. When analyzing the state of the banking sector, regularities and general trends in the functioning of the banking sector of Ukraine have been established, and appropriate calculations have been made. The impact of global financial crises on the activities of banking structures, which must operate in conditions of constant financial instability, is described. Today, the whole world, including Ukraine, is on the verge of a global financial and economic crisis. This raises the question of whether Ukrainian banks have the necessary margin of resilience to vulnerabilities to the financial and economic crisis. In recent years, the functioning and development of the banking system has been characterized by increased financial stability, the level of bank capitalization, liquidity, some improvement in asset quality, reducing risks in banking, as well as the presence of positive structural changes. Today, Ukraine's banking system operates in a complex socio-economic and legal environment, most of which - macroeconomic instability, irrational structure of the industrial complex, the crisis of science and technology, imperfect fiscal and monetary policy, low level of effective demand - complicate sustainable development banking sector and increase competitiveness. In conditions of instability, intensification of turbulent processes, the development of the banking system requires new innovative approaches to determining the mechanisms of effective functioning and stable development based on a system-synergetic approach, which led to the choice and relevance of the chosen topic of this scientific article. Efficiency of banks is a multicomponent, multifaceted, multidimensional system characteristic that depends on many factors and is an effective indicator of performance of functions and achievement of goals and objectives of banks development provided financial stability based on financial stability and dynamic balance, achievement of multiplicative and synergistic effects.

scholarly journals The Effect of Credit Derivatives on Financial Stability

2016 ◽  
Vol 1 (1) ◽  
pp. 22 ◽  
Author(s):  
Richard Van Ofwegen ◽  
Willem F.C. Verschoor ◽  
Remco C.J. Zwinkels
Keyword(s):  
Financial Stability ◽  
Credit Derivatives ◽  
Financial Sector ◽  
Financial Products ◽  
The Stability ◽  
The Impact

Due to the recent financial turmoil, questions have been raised about the impact ofcomplex financial products, like credit derivatives, on financial stability. The academicliterature however does not provide a clear answer to this question. This paper empiricallylinks the stability of the financial sector to the use of credit derivatives for the main constituentsof the European financial sector. We find that the use of credit derivatives increases theprobability of default and thus reduces the overall financial sector stability. In addition,we find evidence that this relationship is progressive and economically meaningful.

scholarly journals BUSINESS REPUTATION AND ITS IMPACT ON FINANCIAL STABILITY OF BANKS

2021 ◽  
Vol 1 (54) ◽  
Author(s):  
Victoria V. Kovalenko ◽  
Keyword(s):  
Financial Stability ◽  
Large Scale ◽  
Social Role ◽  
Financial Institution ◽  
Financial Instability ◽  
Financial Risks ◽  
Economic Relations ◽  
Stage Of Development ◽  
Banking Business ◽  
The Impact

In the article, the author considers the main aspects of the impact of goodwill on the financial stability of banks. It is substantiated that among the numerous threats that lead to financially unstable development of the banking business, a special place should be given to the support of banks’ business reputation. The main reasons are the phenomena of financial instability caused not only by the cyclical development of the economy, but also the ability to take into account a certain state in which the financial system is able to: effectively allocate resources, assess and manage financial risks, absorb shocks. It is proved that the relationship between business reputation and financial stability is determined by the characteristics of the conceptual apparatus; the system of risks to which they are exposed in the course of their activities; methodical approaches to assessing their level. The author concludes that the key challenges for the banking business in the context of digital transformation should be considered from the standpoint of customer interests, from the standpoint of investors (owners) of the banking business and from the standpoint of the regulator. In today’s realities, when the systemic banking crisis has imposed on a large-scale economic, the decisive factor for success and continued activity in the market is the quality of business reputation. The methods of quantitative assessment of the bank’s business reputation include balance-normative, methods of additional and excess profits, methods of royalties and residual value, the method of rating and comprehensive assessment. It is proved that the level of business reputation is related to the life cycle of banks, which includes the stages of formation, growth, maturity and decline. Measures to ensure business reputation depending on the stage of development of the bank are considered. Both the business reputation and financial stability are affected by the established image of the bank. The article states that a positive image is able to maintain the bank in times of financial instability. It is determined that depending on the group of users (non-financial corporations, households, government agencies or social organizations) the image of the bank should be different and meet all requirements.It is determined that a modern bank is not only an institution of the financial market, but also a financial institution for which social role and reputation in social and economic relations become the primary criteria for ensuring their competitive position.

scholarly journals Financial Sector Liberalization and Financial Instability: Case of Selected Southern African Development Community Member Countries

2018 ◽  
Vol 10 (6(J)) ◽  
pp. 42-49
Author(s):  
Nolungelo Cele ◽  
Kapingura FM
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Financial Liberalization ◽  
Financial Sector ◽  
Financial Instability ◽  
Domestic Economy ◽  
Financial Reforms ◽  
Empirical Results ◽  
The Face ◽  
Almost All

The importance of financial liberalization is well documented in the literature. However, there has been an emergency of studies, which indicate that this can be another channel through which financial instability is generated in the domestic economy. Utilising data from four SADC countries, the empirical findings show that financial reforms are positively related to financial instability in almost all the specifications. The empirical results further revealed that financial instability intensifies in the face of a financial crisis. The result suggests that financial liberalization can therefore be another source of financial instability in the region. The empirical results imply that though policymakers should liberalise the financial system, policies aimed at maintaining financial stability should also be promoted.

Monetary and Financial Stability

2013 ◽  
Author(s):  
Brigitte Granville
Keyword(s):  
Financial Stability ◽  
The Other ◽  
Necessary Condition ◽  
Financial Instability ◽  
Information Flows ◽  
Asset Bubbles ◽  
Root Cause ◽  
Monetary Stability ◽  
Long Run ◽  
The Mean

This chapter examines the relation between monetary and financial stability, looking at possible chains of cause and effect running in both directions between them—from the possibility that an unexpected tightening of monetary policy increases the mean probability of financial system distress, to the general risk of monetary stability being undermined by financial instability. The idea that monetary stability encourages financial instability is controversial. Inflation is often the root cause of financial instability by distorting information flows between lenders and borrowers, leading to asset bubbles and over investment. Most empirical evidence tends to support the view that monetary stability should promote financial stability in the long run and not the other way around. But while monetary stability is a necessary condition for financial stability, it is not a sufficient one. In other words, financial instability can still occur even with the inflation rate under control.

Part I Legal and Practical Challenges to Traditional Trade Finance, 3 Soft Clauses in Letters of Credit

2021 ◽  
Author(s):  
Davies Martin
Keyword(s):  
Trade Finance ◽  
Letter Of Credit ◽  
Exchange Time ◽  
The Past ◽  
Blockchain Technology ◽  
The Future ◽  
Letters Of Credit

Soft clauses in letters of credit make the issuing bank’s obligation conditional upon some event or certification that is in the control either of the applicant, or some agent, entity, or organisation in the applicant’s country. Such clauses make an apparently irrevocable letter of credit into what is, in essence, a conditional undertaking dependent on the applicant’s approval. Soft clauses are not always a vehicle for fraud—there may be genuine reasons for their inclusion—but they certainly make it easy for an applicant to ensure that the issuing bank does not pay the beneficiary. This chapter will consider the problems caused by the use of soft clauses, some possible solutions, and it will suggest alternatives, some of which look to the past (bills of exchange/time drafts), some to the present (open account and standby letters of credit), and some to the future (the advent of blockchain technology).

scholarly journals Tax evasion and financial instability

2020 ◽  
Vol 27 (2) ◽  
pp. 531-539
Author(s):  
Peterson K. Ozili
Keyword(s):  
Tax Evasion ◽  
Exploratory Study ◽  
Financial Stability ◽  
Design Methodology ◽  
Tax Revenue ◽  
Financial Instability ◽  
Financial Systems ◽  
Content Type

Purpose The purpose of this paper is to explore the association between tax evasion and financial instability. The discussion also examines the effects of tax evasion for financial instability. Design/methodology/approach This paper is an exploratory study on the effect of tax evasion on financial instability Findings The paper shows that tax evasion can reduce the tax revenue available to governments to manage the economy and can weaken the government’s ability to promote stability in financial systems, whereas on the contrary, taxpayers who evade taxes feel they can use the evaded tax money to rather improve their own financial stability. Originality/value This paper presents the first attempt to carefully examine the association between tax evasion and financial instability.

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