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Symposium 2014

The New Global Financial Architecture

The Challenge

The 2008/09 economic and financial crisis taught the world an important lesson: while the nature of the financial industry has become truly global, with an increasing number of actors and institutions on the credit market, regulation is still highly fragmented among different national supervisory authorities. To maintain systemic stability and prevent contagion, more is required than merely ensuring the orderly operation of individual financial institutions. Different regulators—including monetary authorities—must cooperate in order to achieve better, but not necessarily more, regulation. Better regulation should aim at identifying overleveraging and emerging vulnerabilities, ensuring the adequate pricing of risk, and promoting better incentives for prudent behavior. In pursuing these targets, regulation will require changes to institutional structures, the content of rules, and especially the structures of supervisory agencies.

The prerequisites for such a solution would be international coordination among different national regulators across different jurisdictions. This would be required in order to discourage regulatory arbitrage, to avoid duplicative supervision, and to provide borrowers with an efficient and reliable source of liquidity no matter what their jurisdiction. Such coordination would require dealing with market-to-market rules (which result in procyclical capital requirements), overleveraging, risks arising from maturity transformation, currency mismatches in borrowing and lending, as well as mispricing of collateral.

    Solutions

    Solution
    Symposium 2014

    Integrating domestic financial institutions with capital account management and putting sand in the wheels of potential harmful capital flows

    Integrating domestic financial institutions with capital account management and putting sand in the wheels of potential harmful capital flows

    Integrating domestic financial institutions with capital account management and putting sand in the wheels of potential harmful capital flows

    Polity, Academia, Business, Civil Society

    Proposals

    Proposal
    Symposium 2014

    Some Thoughts on the Shape of the New Global Financial Architecture

    The challenge is to identify potential sources of vulnerability and undertake appropriate remedial measures in order to further reduce and possibly eliminate the potential of the next major financial ...

    The challenge is to identify potential sources of vulnerability and undertake appropriate remedial measures in order to further reduce and possibly eliminate the potential of the next major financial crisis. For any individual country, it is important to maintain macroeconomic and financial discipline (given the swiftness with which markets respond to economic and financial developments). However, strong economic fundamentals, while necessary, are not sufficient conditions for the prevention of such crisis. This is because, as was pointed out by Jeffrey Sachs and Joseph Stiglitz, the cause of the 1997/1998 financial crisis was instability in the international financial markets due to

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2014

    The New Global Financial Architecture

    The International Financial System as designed in 1944 is broken. The present system is a non-system, because the world has shifted to a multi-polar power structure, rather than a uni-polar system wh ...

    The International Financial System as designed in 1944 is broken. The present system is a non-system, because the world has shifted to a multi-polar power structure, rather than a uni-polar system where G-7 can dictate standards and structures. Even though G20 accounts for 85% of world GDP, 80% of world trade and two-thirds of world population, its legal foundation is not by national treaty or law, but essentially self-appointed. Although G20 united in action in 2009 to stem the Global Financial Crisis (GFC), post-crisis reforms on regulation have become controversial and painfully slow, as different countries and markets

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2014

    The Evolution of Risk Management Resulting from the Global Financial Crisis

    The fallout of Global Financial Crisis (‘GFC’) is impacting the way world economics is being shaped, and the way in which businesses are responding to them. The GFC and the ensuing regulatory scru ...

    The fallout of Global Financial Crisis (‘GFC’) is impacting the way world economics is being shaped, and the way in which businesses are responding to them. The GFC and the ensuing regulatory scrutiny has increased the demands on financial institutions to rethink their current operating models to gain competitive advantages and drive value for the organisation. Some of the key outcomes from the GFC are, namely, market liquidity assumptions of banks need to be revisited; macroeconomic and systemic risk monitoring and assessments will gain greater importance; risk interdependencies need to be considered across risk types, entities and jurisdictions; greater granularity

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2014

    Sand in the wheels of harmful capital flows

    Banks which operate across borders on a significant scale should be required to run local operations as subsidiaries. In principle international capital flows could increase global economic efficiency ...

    Banks which operate across borders on a significant scale should be required to run local operations as subsidiaries. In principle international capital flows could increase global economic efficiency, and foster development, directing capital to its most productive use. In practice capital flows come in different forms with different economic value. Long-term foreign direct investment flows, particularly if accompanied by skill or technology transfer, can be strongly beneficial. Short term financial flows can be volatile and harmful, flooding emerging markets with bonanzas of hot money in boom periods, followed by sudden stops. The most unstable category of capital flows is cross-

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2014

    The New Global Financial Architecture

    Global financial stability is a global public good and therefore requires global policy coordination and cooperation. Financial stability is a public good. In economics a public good has two main char ...

    Global financial stability is a global public good and therefore requires global policy coordination and cooperation. Financial stability is a public good. In economics a public good has two main characteristics: it is non-excludable and non-rivalrous. Financial stability is non-excludable since individuals, firms and institutions cannot be excluded from its externalities. It is non-rivalrous because it will still be there no matter how many people benefit from it. And most importantly, financial stability is global. It has a direct impact on the livelihoods of people all over the world – even if they have never travelled abroad or their nations

    Polity, Academia, Business, Civil Society
    Proposal
    Symposium 2014

    Let Market Forces Play a Greater Role

    It has been common for almost a century now (that is, ever since the end of World War I) for schemes for global financial system reform to proceed on the premise that governments must play a leading p ...

    It has been common for almost a century now (that is, ever since the end of World War I) for schemes for global financial system reform to proceed on the premise that governments must play a leading part in designing both national and international financial arrangements.  My own proposal proceeds from what I imagine will be a much more controversial starting point.  This is that the conventional, government-driven approach to reform has consistently failed. It failed, first of all, in the decades after World War I, when governments, by attempting to erect “gold exchange” standards to replace the prewar “classical”

    Polity

    Virtual Library

    Virtual Library File
    Symposium 2014

    International Monetary System and Sustainability

    The 70th Anniversary of the Bretton Woods Conference in 1944 is a good time to review its legacy, implications for today, and lessons from the Great Recession (2007-2009), including the implications f ...

    The 70th Anniversary of the Bretton Woods Conference in 1944 is a good time to review its legacy, implications for today, and lessons from the Great Recession (2007-2009), including the implications for China’s integration with the global economy and possible paths for the future functioning of the International Monetary System (IMS). Any review of the IMS cannot be divorced from the geo-political and geo-strategic issues of globalization and their complex interactions between nations, and at a deeper level, what Samuel Huntington (1996) called “The Clash of Civilizations”.

    The fact that the Cold War drums are beating again means that we need to look at the evolution of the IMS from a broader perspective and over a longer time horizon. The French historian/geographer Ferdinand Braudel (1902-1985) considered that the history of civilizations must be considered within at least three rhythms or time scales: narrative, involving events and personalities; episodic, covering decades of ten to fifty years; and the longue durée – shifts of terrain, climate and technology that cover centuries or more.