- The 2007 global financial crisis has seen a renewed interest in the analysis of the links between financial sector regulation and economic development. There is an open debate about how certain aspects of the existing regulation contributed to the crisis and its spreading; and how the new regulatory framework which has been put in place following the crisis will affect the economic recovery worldwide.
- The IIF is contributing on an ongoing basis to this debate. The analysis produced to date has provided a helpful background to a constructive dialogue with regulators, the public sector and the industry. In the future, the IIF is committed to refining and updating the analysis as needed as part of a wider program of risk monitoring and analysis.
Regulatory Economics Publications
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Making stress testing valuable
April 17, 2013The 2013 Atlanta Fed Financial Markets Annual Conference focused on the role of stress testing as a prudential tool. The general message was that stress testing is a useful tool, but must be used keeping in mind its shortcomings as well as its powers. There are important examples in the U.S. on both of these. As reminded by Chairman Bernanke in his conference keynote speech, the stress testing program introduced in the U.S. in 2009 had the beneficial effect of calming markets by providing credible information about losses and helping improve the resilience of the U.S. banking sector. But, as indicated by the failure of the stress test of Fannie Mae and Freddie Mac in 2008, stress tests results are only as good and reliable as the models they depend on and the scenarios that are simulated.
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The new Bank of England Bank Liability Survey
March 26, 2013The Bank of England published today the results of its new quarterly Bank Liability Survey (BLS). The survey was launched to complement the information provided by the quarterly Credit Conditions Survey (CCS). While the CCS provides information on banks’ demand, supply and cost of credit, the BLS surveys banks on the total amount as well as the composition of their liabilities, together with their cost of funding. The scope of the survey is to identify the factors behind changes in deposits, or how much changes in funding costs vs changes in funding availability affect credit supply. The BLS is also intended to help monitoring developments in banks’ balance sheets, including those due to regulation.
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Another one goes
February 06, 2013Last week’s announced nationalization of the Dutch financial conglomerate SNS REAAL is a sign that there are still conspicuous pockets of distress in the European banking sector, despite the generalized improvement of funding conditions (e.g., see early repayment of LTRO).
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Macroprudential policy in practice
February 05, 2013The Bank of England has released a draft policy statement setting out how its Financial Policy Committee (FPC) plans to carry out its responsibility of monitoring and taming the build-up of systemic risk in the UK. The paper concentrates on two tools: the counter-cyclical capital buffer (CCB)—the FPC is the proposed designated authority in charge of setting this Basel III capital requirement for UK banks—and sectoral capital requirements (SCR).
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It’s not that easy
February 04, 2013The quarterly ECB Bank Lending Survey (BLS) published last week provides a mixed message on the outlook for bank lending in the Euro Area in the last quarter of 2012. Compared to Q3, credit standards were reported to have tightened (and spreads widened) on loans to households, while remaining broadly unchanged for businesses loans. Demand conditions were reported to be broadly less negative than in Q3, particularly with respect to mortgages and consumer loans, although still pointing to a lack of demand.
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Restructuring the US mortgage market
January 10, 2013The US housing market has experienced a gradual improvement over the past few months and there is some growing evidence that more is to come over the next few quarters (see discussion in our November GEM). A risk is posed by the new set of regulations aimed at reshaping the US mortgage market, due to come into effect over the next few years, as prescribed by the Dodd-Frank Act (DFA).
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What concerns bank investors most
December 18, 2012The Association of British Insurers (ABI) has recently published a report looking at the impact of financial sector regulation on bank investors. In many respects, the ABI report highlights issues and concerns similar to those discussed in the IIF Specific Impacts of Regulatory Change on End-Users: Initial Report. Common to the two reports is the notion that establishing a solid investor-base is pivotal for the return of the banking industry to the path of stable and sustainable growth needed to support the economy.
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