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.

Protecting Public Interest in Financial Crisis

2016 ◽  
Vol 14 (1) ◽  
pp. 19-32
Author(s):  
Bojan Škof ◽  
Matej Pollick ◽  
Aleš Kobal
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Public Interest ◽  
Financial Services ◽  
The European Union ◽  
International Organisations ◽  
Social Reforms ◽  
The Public ◽  
Definition Of ◽  
The International Monetary Fund

The financial crisis has been ongoing from beginning of year 2008 and we still have not reached a point of recovery throughout the European Union. Many European countries, such as Greece, Portugal, Ireland, Spain and Cyprus, received the financial help of international organisations (notably the International Monetary Fund, the European Central bank and the European Commission). Taking into account the public interest as the ultimate goal and objective of the system-wide reforms arising from the start from the financial institutions, namely banks and other financial institutions, it is important to analyse whether the wide economic and social reforms which are still reshaping the democratic setup of these countries really met the public interest objectives. Thus, this article deals with first and foremost the definition of public interest in financial services.

Conclusion

2018 ◽  
pp. 205-208
Author(s):  
Deanna Edwards ◽  
Kate Parkinson
Keyword(s):  
Social Work ◽  
Work Practice ◽  
Holistic Approach ◽  
Evidence Base ◽  
Social Work Practice ◽  
Risk Averse ◽  
Policy Makers ◽  
Diverse Range ◽  
Definition Of ◽  
The Uk

This concluding chapter argues for the potential of family group conferences (FGCs) to lead to positive outcomes for families in a diverse range of social work practice areas. The research and evidence base, while patchy, is clear on this. Policy makers, practitioners, and advocates of the FGC process have a responsibility to ensure that the practice does not become marginalised by austerity measures and increasingly risk-averse practice contexts. After all FGCs not only embody the key principles of key social work legislation and policy in the UK but also the values of social work practice. Indeed, the principles of FGCs are clearly aligned to the International Federation of Social Work definition of social work and the model provides the opportunity for local authorities to become increasingly reflective of the holistic approach to social work practice.

Credibility and Reform of Financial Institution Regulation

2001 ◽  
Vol 04 (03) ◽  
pp. 359-364 ◽  
Author(s):  
Gary Stern
Keyword(s):  
Financial Institutions ◽  
Government Regulation ◽  
Financial Institution ◽  
Time Consistency ◽  
Policy Makers ◽  
Market Participants ◽  
Consistency Problem ◽  
Bail Out ◽  
Reserve System ◽  
Credible Policies

There is heightened interest in reforming government regulation of financial institutions to make better use of market discipline and data. We strongly support such reforms, which are being implemented to some degree by the Federal Reserve System. However, market oriented reforms will not work unless government policies are credible in putting market participants, especially those at the largest financial institutions, at risk of loss. Establishing credible policies requires that governments address the time-consistency problem head-on. As a result, we recommend policies that establish credibility by directly reducing the incentive that policy-makers have to protect the creditors of financial institutions. Other policies, which do not address the fundamental reasons why policy-makers bail out creditors, are therefore likely to be circumvented when large banks get into trouble.

Optimale Regulierung bleibt eine Herausforderung!

2011 ◽  
Vol 55 (1-2) ◽  
Author(s):  
Hiltrud Thelen-Pischke
Keyword(s):  
Financial Crisis ◽  
Financial Institutions ◽  
Business Models ◽  
Financial Regulation ◽  
Basel Ii ◽  
Lessons Learned ◽  
Regulatory Environment ◽  
Basel Iii ◽  
Key Factor ◽  
Recent Financial Crisis

The challenge of perfect regulation! Comments to the debate on reforms of the financial sector. In the light of the recent financial crisis the question was raised, if there is any chance of regulation at all to help prevent future crises. As lessons learned from the financial crisis regulators have already adopted numerous measures that aim to enhance financial regulation. Most prominent is the reform of the well-known Basel II soon to be Basel III framework. The following paper takes a closer look on the most important measures against the background of the economic aspects of financial intermediation. The overall focus of this paper is the question if the reform of Basel II can improve the regulatory environment. This includes an analysis of how the changes in financial regulation will affect financial institutions. As a result the paper will show that most of the discussed and adopted measures actually lead to greater regulatory effectiveness. Nevertheless, the key factor for more effective financial regulation is a deep knowledge with regard to financial institutions and their business models. Only a thourough understanding of each individual bank and the system as a whole puts the regulator in the position to assess risks which might lead to the next financial crisis and to react appropriately.

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.

European Policy Reactions to the Financial Crisis

2010 ◽  
pp. 191-218
Author(s):  
Carlo Panico ◽  
Francesco Purificato
Keyword(s):  
Monetary Policy ◽  
Economic Policy ◽  
Financial Crisis ◽  
Financial Institutions ◽  
Euro Area ◽  
Fiscal Policies ◽  
Productive Activity ◽  
European Policy ◽  
The Government ◽  
Recent Financial Crisis

The paper examines how economic policy have been carried out in Europe during the recent financial crisis. It focuses on the changes introduced in the operational procedures of monetary policy in the euro area in 2007 and 2008, pointing out that the objective of the authorities has been to respond to the liquidity needs of the monetary financial institutions, avoiding to loose control over M3. The paper argues that the interventions of the Eurosystem have produced satisfactory results and underlines the problems generated by the fall in productive activity and the need to face them with fiscal policies instruments. The inefficient forms of coordination between monetary and fiscal policies and the management of the government debt in some euro area countries are seen as the main sources of preoccupation for the evolution of the crisis.

scholarly journals The Shift-Contagion Effect Of Global Financial Crisis And The European Sovereign Debt Crisis On OECD Countries

2013 ◽  
Vol 30 (1) ◽  
pp. 301 ◽  
Author(s):  
Irfan Akbar Kazi ◽  
Mohamed Mehanaoui ◽  
Farhan Akbar
Keyword(s):  
Financial Crisis ◽  
Sovereign Debt ◽  
Global Financial Crisis ◽  
Debt Crisis ◽  
Sovereign Debt Crisis ◽  
Policy Makers ◽  
Dynamic Correlations ◽  
European Sovereign Debt Crisis ◽  
Recent Financial Crisis ◽  
The Global Financial Crisis

<p>This article investigates shift-contagion as defined by Forbes and Rigobon (2002) in 16 OECD member economies during most recent financial crisis i.e. global financial crisis (2008-2009) and European sovereign debt crisis (2009-2012), using multivariate asymmetric dynamic conditional correlation model developed by Cappiello et al. (2006). The empirical analyses provide substantial evidence of shifts in the dynamic correlations and hence reconfirm shift-contagion during the global financial crisis that originated from U.S. However, there is no evidence in support of shift-contagion during the European sovereign debt crisis which originated from events in Greece. The results provide important implications for investors and policy makers.</p>

Confidence, Governance, and Growth

2014 ◽  
pp. 48-62
Author(s):  
Ramesh Chandra Das
Keyword(s):  
Financial Crisis ◽  
Granger Causality ◽  
Granger Causality Test ◽  
Causality Test ◽  
Policy Makers ◽  
Euro Zone ◽  
China And India ◽  
The World ◽  
The Usa ◽  
Recent Financial Crisis

The recent financial crisis of the USA and the associated Euro Zone crisis have opened the eyes of the global policy makers and managers of economies in the world in respect of exploring the factors behind it. The present study considers three principal indicators of development—growth, confidence, and governance—for a sample of eight countries with differences in developmental positions to examine whether there is any sort of causal relations among them. By applying the Granger causality test, it observes that in most of the countries, except Greece, there are missing linkages among the indicators in a gross sense. China and India with very poor levels of governance factor have grown at higher magnitudes.

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