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Globalisation and Finance at the Crossroads The Financial Crisis, Regulatory Reform and the Future of Banking

:	Adrian Blundell-Wignall, Paul Atkinson, Caroline Roulet
:	Globalisation and Finance at the Crossroads The Financial Crisis, Regulatory Reform and the Future of Banking
:	Palgrave Macmillan
:	9783319726762
:	1
:	CHF 123.40
:

:	Einzelne Wirtschaftszweige, Branchen
:	English

:	315
:	Wasserzeichen/DRM
:	PC/MAC/eReader/Tablet
:	PDF

Globalisation and the governance of the international financial system have arrived at the crossroads, where either a coherent level playing field for the cross-border activities of banks and multinational enterprises is settled upon, or the risk of another crisis will build up again. This book will explore the underlying problems alongside inconsistent economic and financial trends as a guide for researchers, advanced students and professionals to think about the interconnectedness of the factors involved. Readers will gain insights drawn from recent developments in economic theory and empirical research-a toolkit to help them in their future careers in economics and finance-illustrated with an analysis of the 2008 crisis and its aftermath.

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Adrian Blundell-Wignall is a Special Advisor to the OECD Secretary-General and an Adjunct Professor at the University of Sydney. He is the former Director of the Directorate of Financial and Enterprise Affairs at the OECD. He is an Australian citizen and obtained a PhD in Economics from Cambridge University, UK. He is the author of extensive publications on financial markets and monetary policy in learned journals and books. Prior to the OECD he was Head of Research Department at the Reserve Bank of Australia, and spent 15 years working in financial markets, most of it as a portfolio manager at BT Funds Management in Sydney. He is founder and chairman of The Anika Foundation that raises and invests an endowment fund to provide research scholarships into the issue of adolescent depression and suicide.

Paul Atkinson is a former Deputy Director of the OECD Directorate for Science, Technology and Industry and for many years editor ofOECD Economic Outlook. He is a US national who received his Ph.D. from Cambridge University in the United Kingdom. He has worked extensively on international macroeconomic, monetary and financial issues at the New Zealand Treasury and the Institute of International Finance as well as the OECD, where he continues to act as a consultant on an intermittent basis.

Ca oline Roulet is an economist and analyst in the OECD Directorate of Financial and Enterprise Affairs. She is a French national who received her Ph.D. from University of Limoges in France. She is working extensively on international finance, banking and corporate finance issues.

	Foreword	7
	Contents	10
	List of Figures	12
	List of Tables	17
	Introduction	28
	1 Globalisation Sets the Background to the Crisis	37
	Introduction to Globalisation	37
	The OECD Countries Open Up	38
	The Case of Japan	40
	Mexico Crises	43
	Washington Consensus	44
	Emerging Asia	45
	The China Growth Phase	47
	In Summary	49
	The China Path to Prosperity and the US Financial Crisis of 2007–2008	50
	Export Success and Import Penetration Strategies	51
	Exchange Rate Management and Pricing for Market Share	53
	The Saving Glut and Real Interest Rates	56
	Capital Inflows, Foreign Exchange Intervention and Bond Buying	59
	The Impact of the Rise of Asia on the West	61
	The Competitive Response of Western Companies to Competition from Asia	61
	The Impact of Import Penetration and Firm Innovation on Western Labour Markets	64
	Deflation Pressures in Firms Most Affected by Globalisation	67
	Summing up the Globalisation Background to the Crisis in the USA	69
	The Great Bond Rally	69
	The Great House Price Rally	71
	Appendix to Chapter 1: Modelling the Effect of Foreign Buying on US Bond Yields	72
	References	73
	2 Financial Innovation and Basel II	76
	Introduction to Financial Deregulation and Innovation	76
	The Basel Accords I and II	79
	Financial Innovations: Securitisation and Derivatives	84
	Support for Housing in the USA	84
	Packaging Mortgages	86
	Trading Mortgages Take off	88
	Securitisation Follows	89
	The ‘Waterfall’	89
	The Mortgage Conduit (REMIC) and Structured Investment Vehicles (SIVs)	91
	Teaser Rates and On-Selling	94
	Derivatives	94
	Derivatives Have a Long History	94
	But the Huge Expansion of Derivative Activity Is Recent	97
	Regulating OTC Derivatives in the Run-up to the Crisis	98
	The Demand for Securitisation and Derivatives	100
	Basic Bank Balance Sheet Arithmetic	100
	The Boom in Derivatives	102
	Regulatory and Tax Arbitrage with Complete Markets in Credit	107
	A Basic Regulatory Principle	109
	Banks, Implicit Government Guarantees and Shadow Banks	110
	Tax Arbitrage	111
	Targeting the Ratio of Risk Weighted to Total Assets to Maximise the Return on Equity	112
	Summary	114
	Appendix to Chapter 2: Problems with Pillar 1	115
	References	118
	3 The Watershed Year of 2004: Origins and Causes of the Crisis	121
	Introduction	121
	Global Competition and the Equity Culture for Banking	122
	Remuneration	124
	Causality	125
	Institutional and Regulatory Issues	125
	Why Subprime Securitisation Was Concentrated in the USA	125
	Why US Subprime Securitisation Accelerated from 2004	127
	The American Dream Act	128
	The Fannie and Freddie Caps	129
	The Announcement of Basel II	130
	The SEC Rule Changes in 2004	132
	Corporate Governance	134
	The Crisis Hits, the Lehman Moment	143
	Appendix to Chapter 3: Modelling the Acceleration of US RMBS from 2004	144
	References	146
	4 Business Models of Banks and Global Contagion	148
	Introduction	148
	Contrasting Banking Conglomerate Asset and Liability Composition	149
	Synthetic CDO Issuance by Banks	151
	Issuance of Credit Derivative Structured Products	154
	Bank Losses at the Time of the Crisis	156
	The AIG Payouts	156
	Too Big to Fail, Contagion and Counterparty Risk	157
	Commercial Versus Investment Banking	160
	External Cost of Crises and Resolution Credibility	161
	Appendix A to Chapter 4: The Role of Credit Rating Agencies in the Crisis	164
	Appendix B to Chapter 4: Accounting Standard Controversy Around the Crisis and IFRS9	167
	References	169
	5 Managing the Crisis, Exit and Requirements of Reform	170
	Introduction	170
	Crisis Management	172
	Provision of Liquidity	172
	Deposit Guarantees (and the Covered Bond Fallacy)	175
	Separation of Bad Assets	176
	Recapitalisation of the Banks	179
	Exit from Emergency Measures	180
	Unconventional Monetary Policy and Interest Rates	181
	Requirements for Long-term Reform	182
	The Bank Separation Issue	186
	The Non-operating Holding Company Structure	187
	Conclusions	188
	References	189
	6 The Determinants of the Riskiness of Banks	190
	Introduction	190
	The Different Aspects of Bank Risk	193
	Determinants of Bank Default Risk	199
	Conclusions	202
	Appendix to Chapter 6: Modelling the Distance-to-Default	203
	Model of GSIB Banks’ DTD	204
	References	206
	7 Why Bank Separation Must Complement the Leverage Ratio	207
	Introduction	207
	Business Model Risk for GSIBs Cannot Be Dealt with by Capital Rules	208
	The Structural Separation Proposal	210
	Illustrating the Separate Effects of Leverage Ratios and Investment Bank Separation	213
	Comparisons with Other Separation Proposals	216
	The Attempt to Separate Speculative Functions (Volcker	216
	216	216
	Thoughts on the Mnuchin Review	221
	European Liikanen Proposal	222
	The UK Vickers Rule