scholarly journals A moral hazard perspective on financial crisis

2017 ◽  
Vol 12 (3) ◽  
pp. 298-307
Author(s):  
Francesco Busato ◽  
Cuono Massimo Coletta
Keyword(s):  
Financial Crisis ◽  
Moral Hazard ◽  
Credit Derivatives ◽  
Typical Problem ◽  
Free Rider Problem ◽  
Sarbanes Oxley ◽  
European Banks ◽  
Modern Economic ◽  
Recent Financial Crisis ◽  
Bail Out

Moral hazard is a typical problem of modern economic system, if we consider its a central role in the events leading up to the (financial) crisis of 2008. Therefore, there is a need to better appreciate its nature and its role, if future reforms are to be well designed in order to prevent further crises, default, bankrupt, down the line. Along this perspective, the paper discusses a moral hazard perspective on recent financial crisis, from Enron bankruptcy, to Lehman case, through AIG, Bearn Stern, Citigroup bail out, commenting, eventually, selected rules contained in the Sarbanes Oxley Act issued by the U.S. Government in 2002. The paper, next, comments on recent crisis of four Italian banks and on the bail in recently introduced for European banks. Eventually, the paper focuses on the so-called “free-rider” problem, discussing pro and cons of selected financial instruments (e.g. credit derivatives), while offering from a technical standpoint with the help of an analytical approach.

scholarly journals To bail out or not to bail out systemically relevant financial institutions: The incentives of policy makers

2012 ◽  
Vol 1 (4) ◽  
pp. 88-93
Author(s):  
Lucas Marc Fuhrer
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Risk Averse ◽  
Clear Definition ◽  
Policy Makers ◽  
Systemic Risks ◽  
Recent Financial Crisis ◽  
Definition Of ◽  
Bail Out

The recent financial crisis has shown that many financial institutions may be systemically relevant. Their bankruptcy would cause significant costs for the overall economy. However, a clear definition of systemic risks still does not exist. Thus, the decision, whether an institution is, or is not systemically relevant is in the end made by policy makers. This paper takes a closer look at the incentives available to policy makers and their influence on the bailout decision. In the model presented here it is possible to show, that too many financial institutions get bailed out, when assuming that policy makers tend to be more risk-averse than socially optimal. The costs due to this misallocation of resources can be significant.

16. Corporate governance 2: the UK corporate governance debate

2016 ◽  
Author(s):  
Alan Dignam ◽  
John Lowry
Keyword(s):  
Corporate Governance ◽  
Financial Crisis ◽  
The United States ◽  
Financial Industry ◽  
Government Response ◽  
Sarbanes Oxley ◽  
Independent Review ◽  
The Government ◽  
Recent Financial Crisis ◽  
The Uk

Titles in the Core Text series take the reader straight to the heart of the subject, providing focused, concise, and reliable guides for students at all levels. This chapter explores the corporate governance debate in the UK in terms of industry and the government. After presenting the background to the UK debate, it considers UK corporate theory and the industry and government response to the corporate governance debate. It then examines the Sarbanes-Oxley Act that became law in the United States in July 2002; the UK Government’s independent review of non-executive directors (the Higgs Review); the link between corporate governance failure and the recent financial crisis; and the Walker Report (2009) which reviewed problems within the UK financial industry. Finally, it outlines a number of reforms that have been adopted between 2009 and 2012 concerning the financial crisis in general and the Walker Report in particular.

Statement by the Managing Director to the International Monetary and Financial Committee on the IMF Reform Agenda

Policy Papers ◽  
2010 ◽  
Vol 2010 (96) ◽  
Author(s):  
Keyword(s):  
Financial Crisis ◽  
Moral Hazard ◽  
Financial Institutions ◽  
Financial Stability ◽  
Financial Burden ◽  
Reform Agenda ◽  
Cross Border ◽  
Recent Financial Crisis ◽  
Financial Groups ◽  
Made In

The recent financial crisis has given renewed urgency to the need for resolution systems for financial institutions, which both safeguard financial stability and limit moral hazard. However, experience demonstrates that these systems will not be effective unless progress is also made in developing a framework that applies on a cross-border basis. Since many systemically important financial groups operate globally, an uncoordinated application of resolution systems by national authorities will make it much more difficult to both secure the continuity of essential functions (thereby limiting contagion), and ensure that shareholders and creditors bear the financial burden of the resolution process.

ASPEK ETIK DAN SISTEMIK DALAM EKONOMI DAN BISNIS ISLAM

ALQALAM ◽  
2014 ◽  
Vol 31 (1) ◽  
pp. 187
Author(s):  
Budi Harsanto
Keyword(s):  
Financial Crisis ◽  
Business Ethics ◽  
Moral Hazard ◽  
Global Financial Crisis ◽  
Financial Institution ◽  
Research Question ◽  
Academic Journals ◽  
Lehman Brothers ◽  
The World ◽  
The Global Financial Crisis

The fall of Enron, Lehman Brothers and other major financial institution in the world make researchers conduct various studies about crisis. The research question in this study is, from Islamic economics and business standpoint, why the global financial crisis can happen repeatedly. The purpose is to contribute ideas regarding Islamic viewpoint linked with the global financial crisis. The methodology used is a theoretical-reflective to various article published in academic journals and other intellectual resources with relevant themes. There are lots of analyses on the causes of the crisis. For discussion purposes, the causes divide into two big parts namely ethics and systemic. Ethics contributed to the crisis by greed and moral hazard as a theme that almost always arises in the study of the global financial crisis. Systemic means that the crisis can only be overcome with a major restructuring of the system. Islamic perspective on these two aspect is diametrically different. At ethics side, there is exist direction to obtain blessing in economics and business activities. At systemic side, there is rule of halal and haram and a set of mechanism of economics system such as the concept of ownership that will early prevent the seeds of crisis. Keywords: Islamic economics and business, business ethics, financial crisis 

European Welfare State Constitutions after the Financial Crisis

2020 ◽  
Keyword(s):  
Financial Crisis ◽  
Structural Changes ◽  
Social Protection ◽  
Welfare States ◽  
Constitutional Review ◽  
State Constitutions ◽  
Social Law ◽  
European Welfare State ◽  
One Step ◽  
Recent Financial Crisis

At a time when Europe is in the grip of a new crisis, it is especially useful to look back at the experiences of the European welfare states’ constitutions during the most recent financial crisis. This book provides unique insights by analysing social protection reforms undertaken in nine European countries, from both a social law and a constitutional law perspective. It highlights the mixture of short-term cuts in benefits and of structural changes in social protection schemes. The crisis might have helped to further the partial and temporary implementation of reforms, but it certainly cannot spare us from the debates and political compromises that are unavoidable in order to reform social protection thoughtfully and thoroughly. Moreover, the book records the outcome of relevant constitutional review proceedings and thereby demonstrates that, even if corrections remained restricted to relatively few cases, social rights matter. The financial crisis advanced their protection one step further, but left many questions open. One lesson is of paramount importance, also for helping us overcome the current pandemic crisis: we need a substantial and commonly accepted agreement in the Europe Union on how to balance the economy and social protection in the future.

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