Thorvaldur Gylfason, Professor of Economics of University of Iceland lists 11 Lessons from the Iceland Banking crisis. PPP Lusofonia comments on some of them.
Lesson 1. We need effective legal protection against predatory lending just as we have long had laws against quack doctors. The problem is asymmetric information. Doctors and bankers typically know more about complicated medical procedures and complex financial instruments than their patients and clients.
Rescuing overleveraged borrowers also serves to rescue imprudent and predatory creditors. That’s why the deleveraging sacrifice has to be shared all around. Borrowers loose their equity, banks and creditors must take a “haircut” on their loan assets by being required to reschedule payments, to reduce interest rates, to accept debt-to-equity conversions, even to forgive debt. And third, taxpayers usually have to help support some of the cost, if for no other reason, becuase of the frequent regulatory failures. If the nameless bondholders are made whole, “moral hazard” becomes a risk on both the lender as well as the borrower sides.
Lesson 2. Payment of rating agencies by the borrowers and issuers creates an obvious and fundamental conflict of interest and needs to be revised. Likewise, banks should not be allowed to hire employees of regulators.
PPP Lusofonia: Rating agencies present a typical “agency problem”. Regardless of who pays the rating fees, it’s not the money of the rating agencies at risk after all. A traditional credit committee staffed by well experienced bankers is a much be better way to run a banking system.
There is another lesson (Lesson 12) in this crisis: Credit risk analysis and management is a “core banking skill” and foolish is the bank which outsources this fundamental function.T
Lesson 6. Central banks should not accept rapid credit growth, even if consumer inflation remains low – as did the Federal Reserve under Alan Greenspan and the Central Bank of Iceland. http://www.voxeu.org/index.php?q=node/4612
PPP Lusofonia: In an open economy, excessive money and credit growth may be temporarily reflected in imports. But credit growth is probably the best single indicator of potential financial stress. But nowadays, the traditional “money supply” now covers a smaller and smaller portion of financial liquidity.
See the other lessons in www.voxeu.org/
Lesson 1. We need effective legal protection against predatory lending just as we have long had laws against quack doctors. The problem is asymmetric information. Doctors and bankers typically know more about complicated medical procedures and complex financial instruments than their patients and clients.
Rescuing overleveraged borrowers also serves to rescue imprudent and predatory creditors. That’s why the deleveraging sacrifice has to be shared all around. Borrowers loose their equity, banks and creditors must take a “haircut” on their loan assets by being required to reschedule payments, to reduce interest rates, to accept debt-to-equity conversions, even to forgive debt. And third, taxpayers usually have to help support some of the cost, if for no other reason, becuase of the frequent regulatory failures. If the nameless bondholders are made whole, “moral hazard” becomes a risk on both the lender as well as the borrower sides.
Lesson 2. Payment of rating agencies by the borrowers and issuers creates an obvious and fundamental conflict of interest and needs to be revised. Likewise, banks should not be allowed to hire employees of regulators.
PPP Lusofonia: Rating agencies present a typical “agency problem”. Regardless of who pays the rating fees, it’s not the money of the rating agencies at risk after all. A traditional credit committee staffed by well experienced bankers is a much be better way to run a banking system.
There is another lesson (Lesson 12) in this crisis: Credit risk analysis and management is a “core banking skill” and foolish is the bank which outsources this fundamental function.T
Lesson 6. Central banks should not accept rapid credit growth, even if consumer inflation remains low – as did the Federal Reserve under Alan Greenspan and the Central Bank of Iceland. http://www.voxeu.org/index.php?q=node/4612
PPP Lusofonia: In an open economy, excessive money and credit growth may be temporarily reflected in imports. But credit growth is probably the best single indicator of potential financial stress. But nowadays, the traditional “money supply” now covers a smaller and smaller portion of financial liquidity.
See the other lessons in www.voxeu.org/
This time is different...
ResponderEliminarEste livro de Rogoff e Reinhart tem o sub-título de "Oito séculos de folia financeira" e uma mensagem que se pode resumir da seguinte forma:
- Demasiada dívida e expansão de credito é sempre perigosa
- Após um período de acalmia financeira, as pessoas esquecem esta lição fundamental e começam a emprestar mais (os credores) e a acumular dívida sem conta(os devedores) criando o efeito bolha
- Quanto maior a bolha, maior a probabilidade de pânico quando rompe.
- A fase de recuperação pós-crise financeira involve contração financeira, recessão económica, desemprego e menor crescimento no médio prazo
...Claramente a melhor forma de lidar com as crises de sobre-endividamento é de as evitar...
Fonte: Público, 11-Maio-2010
Tal qual como o corpo humano, a economia é um sistema de equilibro delicado. Os erros pagam-se caro.
Quando a cabeça não tem juizo...
o corpo é que paga
Os credores têm a sua quota parte de responsabilidade no sobre-endividamento, mas a atribuição de culpa nem sempre beneficia o endividado.
ResponderEliminarO credor diz errei/emprestar, não volto a errar/emprestar.
Os mutuários pequenos não têm suficiente poder negocial para passar o problema para o lado dos bancos.
We need to know how to count the cranes to identify construction bubbles.
ResponderEliminar