Future of Banking by Thorsten Beck

By Thorsten Beck

Banking is again within the headlines. From determined efforts by way of governments to handle the Eurozone difficulty to the "Occupy Wall highway" flow that's at present spreading around the globe, banks are back at centre degree. This new VoxEU.org publication offers a suite of essays via top ecu and US economists that offer recommendations to the monetary problem and recommendations for medium- to long term reforms to the regulatory framework within which monetary associations function. Key proposals comprise: -- eu secure Bonds (ESBies): severe of Eurobonds, the authors suggest another resolution within the type of "European secure Bonds" (ESBies) -- securities funded by way of at the moment impressive executive debt (up to 60\% of GDP) that will represent a wide pool of "safe" resources. The authors argue that ESBies might handle either liquidity and solvency difficulties in the ecu banking approach and, so much seriously, aid to differentiate among the 2. -- Capital and liquidity specifications -- hazard weights are an important: whereas ringfencing could be a part of a smart regulatory reform, it's not enough. Capital requisites with danger weights which are dynamic, counter-cyclical and have in mind co-dependence of economic associations are severe, and one dimension doesn't inevitably healthy all. equally, liquidity necessities need to be adjusted to lead them to much less inflexible and pro-cyclical. whereas banks are at present under-taxed, the presently mentioned monetary transaction tax wouldn't considerably impact banks' risk-taking behaviour and can truly raise industry volatility; furthermore, its profit strength may be over priced. -- the necessity for a much better European-wide regulatory framework: If the typical ecu industry in banking is to be kept -- and the authors argue that it may be -- then the geographic perimeter of banks needs to be matched with an analogous geographic perimeter in legislation, which eventually calls for greater European-level associations.

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Richardson, M, RC Smith and I Walter (2011), “Large Banks and the Volcker Rule”, in Acharya, VV, TF Cooley, MP Richardson, and I Walter (eds), Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance. Hoboken NJ: Wiley. About the author Arnoud Boot is Professor of Corporate Finance and Financial Markets at the University of Amsterdam and director of the Amsterdam Center for Law & Economics (ACLE). He is a member of the Advisory Scientific Committee of the ESRB (European Systemic Risk Council), the Dutch Social Economic Council (SER) and the Bank Council of the Dutch Central Bank (DNB).

From this perspective, ownership structure influences the ability of owners to 51 VOX Research-based policy analysis and commentary from leading economists alter bank risk in response both to standard risk-shifting incentives and to incentives created by official regulations. Taken together, these theories predict that diversified owners have stronger incentives to increase risk than non-shareholder managers, so banks with powerful, diversified owners tend to be riskier than widely held banks, holding other factors constant.

Gennaioli, Nicola, Andrei Shleifer, and Robert Vishny (2011) “A Model of Shadow Banking”, mimeo, CREI. Gertler, Mark and Simon Gilchrist (1994) “Monetary Policy, Business Cycles, and the Behavior of Small Manufacturing Firms”, Quarterly Journal of Economics 109: 309340. org, 19 June. 26 The Future of Banking Ioannidou, Vasso P, Steven Ongena, and José-Luis Peydró (2009) “Monetary Policy, Risk-taking and Pricing: Evidence from a Quasi-Natural Experiment”, mimeo, CentER - Tilburg University / European Central Bank.

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