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Symposium 2008

Strengthening the Global Financial System

The Challenge

The repeated reoccurrence of financial crises since the early 1990s has led to calls for institutional reform. The most recent example is the crisis that began with the problems on the subprime segment of the US housing market. Numerous commentators have observed that the interactions between commercial banks, other financial intermediaries, credit rating agencies, financial regulators, national banks and governments were partly responsible for the financial unrest. There is a need for better management and regulation of diverse, interrelated risks.

How can existing financial institutions be reorganized or restructured to permit improved risk management and supervision, more effective techniques of hedging and distributing financial risks, and more effective disclosure of risk exposures and financial valuation methods to the public? What is the future role of banks and financial intermediaries in risk management?

Once all measures to prevent financial crises have failed, how should national authorities address stresses in troubled financial institutions and how should they deal with impaired assets in the presence of disruptive write-downs? And finally, is the current international monetary system optimal to guarantee financial stability or does it need overhaul? What exchange rate regimes and international governance structures would improve financial stability?

    Solutions

    Solution
    Symposium 2008

    Enhance transparency by standardization of complex financial contracts and shifting the trading of derivatives onto regulated exchanges.

    Enhance transparency by standardization of complex financial contracts and shifting the trading of derivatives onto regulated exchanges.

    Enhance transparency by standardization of complex financial contracts and shifting the trading of derivatives onto regulated exchanges.

    Polity, Business
    Solution
    Symposium 2008

    Strengthen regulation and supervision of all systemically relevant financial institutions – both in the banking and shadow-banking sectors – but avoid regulatory overkill by focusing on simple rules on capital ...

    Strengthen regulation and supervision of all systemically relevant financial institutions – both in the banking and shadow-banking sectors – but avoid regulatory overkill by focusing on simple rul ...

    Strengthen regulation and supervision of all systemically relevant financial institutions – both in the banking and shadow-banking sectors – but avoid regulatory overkill by focusing on simple rules on capital adequacy.

    Polity
    Solution
    Symposium 2008

    Make bailouts come at a cost; tougher supervision and tighter capital standards are the price financial institutions have to pay for official rescue operations meant to stem systemic risk.

    Make bailouts come at a cost; tougher supervision and tighter capital standards are the price financial institutions have to pay for official rescue operations meant to stem systemic risk.

    Make bailouts come at a cost; tougher supervision and tighter capital standards are the price financial institutions have to pay for official rescue operations meant to stem systemic risk.

    Polity, Civil Society
    Solution
    Symposium 2008

    Address the procyclicality of the financial and regulatory system by adjusting mark-to-market accounting and by introducing flexible capital adequacy requirements.

    Address the procyclicality of the financial and regulatory system by adjusting mark-to-market accounting and by introducing flexible capital adequacy requirements.

    Address the procyclicality of the financial and regulatory system by adjusting mark-to-market accounting and by introducing flexible capital adequacy requirements.

    Polity, Business
    Solution
    Symposium 2008

    Eliminate conflicts of interest and promote competition in the credit rating market.

    Eliminate conflicts of interest and promote competition in the credit rating market.

    Eliminate conflicts of interest and promote competition in the credit rating market.

    Polity, Business
    Solution
    Symposium 2008

    Replace the Basel II accord, in order to ensure systemic stability by factoring both illiquidity and insolvency risks into capital adequacy requirements and to deprive credit rating agencies of their ...

    Replace the Basel II accord, in order to ensure systemic stability by factoring both illiquidity and insolvency risks into capital adequacy requirements and to deprive credit rating agencies of their ...

    Replace the Basel II accord, in order to ensure systemic stability by factoring both illiquidity and insolvency risks into capital adequacy requirements and to deprive credit rating agencies of their regulatory influence.

    Polity, Business
    Solution
    Symposium 2008

    Gear monetary policy towards price stability first and foremost but, to avoid asset price bubbles, leave open the possibility of “leaning against the wind.”

    Gear monetary policy towards price stability first and foremost but, to avoid asset price bubbles, leave open the possibility of “leaning against the wind.”

    Gear monetary policy towards price stability first and foremost but, to avoid asset price bubbles, leave open the possibility of “leaning against the wind.”

    Polity

    Proposals

    Proposal
    Symposium 2008

    Strengthening Financial Institutions

    A Starting Point A starting point for this discussion could be to recognize that the current financial crisis, like many previous financial crises began with an asset price bubble. The severity of thi ...

    A Starting Point A starting point for this discussion could be to recognize that the current financial crisis, like many previous financial crises began with an asset price bubble. The severity of this particular crisis is enhanced by the fact that the asset in question is highly indivisible and quite illiquid. This raises the obvious question of whether financial institutions can do more to recognize and deter bubbles. This very discussion was held in the U.S. in the late 1990’s at the Jackson Hole conference. One popular view is that Fed policies actually caused the bubble. Can this be

    Polity, Business
    Proposal
    Symposium 2008

    Global crises requiere global responses.

    The current global financial crisis will induce changes in the regulatory framework under which the local and global capital markets operate. There will be, very likely, a widening of the boundaries o ...

    The current global financial crisis will induce changes in the regulatory framework under which the local and global capital markets operate. There will be, very likely, a widening of the boundaries of the regulatory system and related “safety net” policies, which in practice have already been extended, at least in the US and Europe. There will also be changes in regulations to reduce the pro cyclical instability induced by the current system of capital requirements and fair value accounting, the extent of maturity transformation, the limitation of the “Originate to Distribute Model” and issues of clearance and settlement related to

    Polity
    Proposal
    Symposium 2008

    Strengthening Financial Institutions

    Background Standard Chartered derives more than 90% of its operating income and profits from Asia, Africa and the Middle East. A top 3 UK bank, for the past 5 years income and profits have more than d ...

    Background Standard Chartered derives more than 90% of its operating income and profits from Asia, Africa and the Middle East. A top 3 UK bank, for the past 5 years income and profits have more than doubled. In one of the most difficult periods in global financial services history, Standard Chartered recorded a 31% rise in pre-tax profits in last month’s interim results. Standard Chartered has benefitted from the fact that it has a relatively low exposure to sub-prime investment vehicles compared to other international banks and its strategy has historically excluded the US and European mortgage markets, instead

    Polity, Business
    Proposal
    Symposium 2008

    Strengthening Financial Institutions

    The current financial crisis has exposed weaknesses in several areas: financial intermediaries’ risk management; the regulatory framework; central banks’ liquidity management; central banks’ mon ...

    The current financial crisis has exposed weaknesses in several areas: financial intermediaries’ risk management; the regulatory framework; central banks’ liquidity management; central banks’ monetary policy strategies; and the global monetary system. Here is my sketch of proposed solution for further discussion at the GES. Financial intermediaries should focus on improving their liquidity risk management. The crisis has shown that both funding liquidity and market liquidity can evaporate very quickly. Securing external short-term funding on the liability side of the balance sheet can become very costly or even impossible when the markets for the assets that serve as collateral freeze up,

    Polity
    Proposal
    Symposium 2008

    Strengthening Financial Institutions

    The repeated reoccurrence of financial crises since the early 1990s has led to calls for institutional reform. The most recent example that is the crisis that began with the problems on the subprime s ...

    The repeated reoccurrence of financial crises since the early 1990s has led to calls for institutional reform. The most recent example that is the crisis that began with the problems on the subprime segment of the US housing market. Numerous commentators have observed that the interactions between commercial banks, other financial intermediaries, credit rating agencies, financial regulators, national banks and governments were partly responsible for the financial unrest. There is a need for better management and regulation of diverse, interrelated risks. It is evident that especially the fundamental change of the characteristics of the financial sector calls for an

    Polity, Academia, Business, Civil Society