Rethinking China’s capital market and financial stability after the global financial crisis: the significance of institutional investors

2017 ◽  
pp. 38-66
Author(s):  
Jiye Hu ◽  
Yang Chen
Keyword(s):  
Financial Crisis ◽  
Capital Market ◽  
Institutional Investors ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
The Global Financial Crisis

A Global Perspective on Securitized Debt

2018 ◽  
Author(s):  
Steven L Schwarcz
Keyword(s):  
United States ◽  
Financial Crisis ◽  
Capital Market ◽  
Global Financial Crisis ◽  
The United States ◽  
Global Perspective ◽  
Capital Markets Union ◽  
The Global Financial Crisis ◽  
Asset Backed Securities ◽  
The Eu

Securitisation represents a significant worldwide source of capital market financing. European investors commonly invest in asset-backed securities issued in U.S. securitisation transactions, and vice versa One of the key goals of the European Commission's proposed Capital Markets Union (CMU) is to further facilitate securitisation as a source of capital market financing as a viable alternative to bank-based finance for companies operating in the EU. To that end, this chapter explains securitisation and attempts to put its rise, its decline after the global financial crisis, and its recent CMU-inspired revival into a global perspective. It examines not only securitisation's relationship to the financial crisis but also post-crisis comparative regulatory approaches in the EU and the United States.

scholarly journals Would Macroprudential Regulation Have Prevented the Last Crisis?

2019 ◽  
Vol 33 (1) ◽  
pp. 107-130 ◽  
Author(s):  
David Aikman ◽  
Jonathan Bridges ◽  
Anil Kashyap ◽  
Caspar Siegert
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Financial System ◽  
Mortgage Lending ◽  
Financial Policy ◽  
Policy Interventions ◽  
The Us ◽  
Set Up ◽  
The Global Financial Crisis

How well equipped are today’s macroprudential regimes to deal with a rerun of the factors that led to the global financial crisis? To address the factors that made the last crisis so severe, a macroprudential regulator would need to implement policies to tackle vulnerabilities from financial system leverage, fragile funding structures, and the build-up in household indebtedness. We specify and calibrate a package of policy interventions to address these vulnerabilities—policies that include implementing the countercyclical capital buffer, requiring that banks extend the maturity of their funding, and restricting mortgage lending at high loan-to-income multiples. We then assess how well placed are two prominent macroprudential regulators, set up since the crisis, to implement such a package. The US Financial Stability Oversight Council has not been designed to implement such measures and would therefore make little difference were we to experience a rerun of the factors that preceded the last crisis. A macroprudential regulator modeled on the UK’s Financial Policy Committee stands a better chance because it has many of the necessary powers. But it too would face challenges associated with spotting build-ups in risk with sufficient prescience, acting sufficiently aggressively, and maintaining political backing for its actions.

Empirical evidence of risk shifting in bonds and debt-based sukuk

2018 ◽  
Vol 9 (5) ◽  
pp. 687-700 ◽  
Author(s):  
Siti Raihana Hamzah ◽  
Obiyathulla Ismath Bacha ◽  
Abbas Mirakhor ◽  
Nurhafiza Abdul Kader Malim
Keyword(s):  
Financial Crisis ◽  
Financial Stability ◽  
Global Financial Crisis ◽  
Financial System ◽  
Distinct Advantage ◽  
Risk Shifting ◽  
Accounting Data ◽  
Content Type ◽  
Operating Risk ◽  
The Global Financial Crisis

Purpose The purpose of this paper is to examine the extent of risk shifting behavior in bonds and sukuk. The examination is significant, as economists and scholars identify risk shifting as the primary cause of the global financial crisis. Yet, the dangers of this debt-financing feature are largely ignored – one needs to only witness the record growth of global debt even after the global financial crisis. Design/methodology/approach To identify the signs of risk shifting existence in the corporations, this paper compares each corporation’s operating risk before and after issuing debt. Operating risk or risk of a firm’s activities is measured using the volatility of the operating earnings or coefficient variation of earning before interest, tax, depreciation and amortization (EBITDA). Using EBITDA as the variable offers one distinct advantage to using asset volatility as previous research has – EBITDA can be extracted directly from firms’ accounting data and is not model-specific. Findings Risk shifting can be found in not only the bond system but also the debt-based sukuk system – a noteworthy finding because sukuk, supposedly in a different class from bonds, have been criticized in some quarters for their apparent similarity to bonds. On the other hand, this study thus shows that equity feature, when it is embedded in bonds (as in convertible bonds) or when a financial instrument is based purely on equity (as in equity-based sukuk), the incentive to shift the risk can be mitigated. Research limitations/implications Global awareness of the dangers of debt should be increased as a means of reducing the amount of debt outstanding globally. Although some regulators suggest that sukuk replace debt, they must also be aware that imitative sukuk pose the same threat to efforts to avoid debt. In short, efforts to ensure future financial stability cannot address only debts or bonds but must also address those types of sukuk that mirror bonds in their operation. In the wake of the global financial crisis, amid the frantic search for ways of protecting against future financial shocks, this analysis aims to help create future stability by encouraging market players to avoid debt-based activities. Originality/value This paper differs from the previous literature in two important ways, viewing risk shifting behavior not only in relation to debt or bonds but also when set against debt-based sukuk, which has been subjected to similar criticism. Indeed, to the extent that debts and bonds encourage risk shifting behavior and threaten the entire financial system, so, too, can imitation sukuk or debt-based sukuk. Second, this paper is unique in exploring the ability of equity features to curb equity holders’ incentive to engage in risk shifting behavior. Such an examination is necessary for the wake of the global financial crisis, for researchers and economists now agree that risk shifting must be a controlled behavior – and that one way of controlling risk shifting is by implementing the risk sharing feature of equity-based financing into the financial system.

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