The IMF has published reports on the risks to little countries with big banking systems, like Iceland, Ireland and Cyprus, where bank crashes drag sovereign ratings down.
But the problem of banks that are "too big to bail" is even more critical in the big countries, because the systemic impact is not just local but international, and the bailout of the foolish creditors causes moral hazard on a much bigger scale. This is hapenning in the Eurozone where the costs of bad credit decisions are forced almost entirely on the borrowers.
That's why Sheila Blair of the US FDICcapaigned to place an overall limit on bank leverage. They have finally succeeded with the new rule dated 8-April - 2014:
The Federal Reserve Board, the Federal Deposit Insurance Corporation (FDIC), and the Office of the Comptroller of the Currency (OCC) on Tuesday adopted a final rule to strengthen the leverage ratio standards for the largest, most interconnected U.S. banking organizations.
We need a Sheila Blair in Europe.
Source: Heroes in banking reform and prudential supervision
See also http://www.bairblog.com/sometimes-more-is-less-when-it-comes-to-making-regulations-more-effective/
But the problem of banks that are "too big to bail" is even more critical in the big countries, because the systemic impact is not just local but international, and the bailout of the foolish creditors causes moral hazard on a much bigger scale. This is hapenning in the Eurozone where the costs of bad credit decisions are forced almost entirely on the borrowers.That's why Sheila Blair of the US FDICcapaigned to place an overall limit on bank leverage. They have finally succeeded with the new rule dated 8-April - 2014:
US Agencies Adopt Enhanced Supplementary Bank Leverage Ratio
We need a Sheila Blair in Europe.
Source: Heroes in banking reform and prudential supervision
See also http://www.bairblog.com/sometimes-more-is-less-when-it-comes-to-making-regulations-more-effective/
Compare the continuing denial of Issing or Constâncio with the prudent foresight of Sheila Blair with
ResponderEliminarIs this what separates the men from the boys?
No, from the women.
In euro-nomics,the creditor is always right.
ResponderEliminarAnd Eurozone crisis management has been more about protecting the foolish lenders, perhaps more so than in other financial crisis in the past.
Strict conditione are normal in any credit workout mode, but they should apply to all those responsible for the credit excesses, the borrowers, the lenders, and even the (in)prudential regulators who are in denial about the disastrous unintended consequences of their (in)action.
One danger of economic legalism arises when the laws are distorted like the and/or misapplied, and serve only to protect the strong.
In 50 years, the survivors of the credit bubble-and-crunch will be reading books titled "the Lawyers of Finance", like the recent "Lords of Finance".
It’s curious to read in the Economist that “Bagehot invented central banks to rescue banks”. Central banks should not be saving individual banks, but rather supervising the financial system and insuring that overall financial intermediation is efficient, channeling savings to productive long-term projects, not zipping around the globe at the speed of a click.
ResponderEliminarAnd classifying regulatory instruments as excessive and “corrosive” needs a much finer filter:
Interest subsidies and tax exemptions can be corrosive indeed. Why should firms get tax relief on the costs of financing (capital) and not on the costs of the other factor of production – labour? Same for the household sector: why should debt-financed housing be favoured?
Far from being corrosive, self-insured mutualized deposit guarantee schemes, with reinforced due diligence and supervision, should not require taxpayer support, provided that banks are kept small enough to bail. If deposit guarantees burden the taxpayer, something is being done wrong.
Bank shareholders and regulators are jointly responsible for failures of corporate governance and risk management, having distorted and slanted modern finance into a system which pushes savings towards applications favoured by subsidies and tax distortions and into illusive risk-free or “de-risked” zero-risk weighed Government bonds.
If you want to find something truly corrosive, look to BASEL.
É curioso ler na revista The Economist que " Bagehot inventou bancos centrais para salvar os bancos" . Os bancos centrais não devem ser salvar bancos individuais, mas sim supervisionar o sistema financeiro e garantir que a intermediação financeira global é eficiente, canalizando a poupança para projectos produtivos a longo prazo, não correndo em redor do globo à velocidade de um clique.
ResponderEliminarE classificar os instrumentos regulatórios como excessivos e " corrosivos" precisa de um filtro muito mais fino:
Certo, asbonificações de juros e isenções fiscais podem ser corrosivas. Como justificar que as empresas tenham benefícios fiscais sobre os custos de financiamento (capital) e não sobre os custos de outro factor de produção - o trabalho? O mesmo para o sector das famílias: por que favorecer o crédito à habitação e não outras formas de pagar a casa?
Longe de ser corrosivo, o auto-seguro mutualizado dos sistemas de garantia de depósitos, com reforço da due diligence supervisão dos bancos, não deve exigir apoio dos contribuintes, desde que os bancos são mantidos suficientement pequenos para resgatar os depositantes. Se a garantia de depósitso vier a sobrecarregar o contribuinte,é porque algo está sendo feito de errado .
Acionistas e reguladores bancários são co-responsáveis pelas falhas de governança corporativa e de gestão de riscos, ao distorcer e inclinar as finanças modernas num sistema que empurra a poupança para aplicações favorecidas por subsídios e distorções fiscais e para obrigações ditas livre de risco ou " de- risked" com as ponderação de zero - risco para títulos do Tesouro
Se quiser encontrar algo verdadeiramente corrosivo, basta olhar para Basileia, BASEL.