1 / 20

How to Avoid Another Financial Crisis Central European Perspective

How to Avoid Another Financial Crisis Central European Perspective. Andrzej Raczko. Reputable monetary policy (independent central bank) Long-term fiscal stabilization Structural reforms boosting international competitiveness (labor market) Free float of capital Good business climate

Download Presentation

How to Avoid Another Financial Crisis Central European Perspective

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. How to Avoid Another Financial CrisisCentral European Perspective Andrzej Raczko

  2. Reputable monetary policy (independent central bank) • Long-term fiscal stabilization • Structural reforms boosting international competitiveness (labor market) • Free float of capital • Good business climate • Domination of private financial sector

  3. Accumulation of huge global imbalances (exchange rate rigidity) • Ample liquidity (global saving glut) • - „negative experience” from former financial crisis – growing F/X reserves of central banks, • - corporate saving, • - high commodity prices and financial accumulation (oil countries) • Low interest rates (easy monetary policy in the USA) • Widespread growth of price assets (housing bubble) • Low personal saving in the USA

  4. Liquidity risk (excessive leverage) • Wholesale financial market development • Interaction betweenmark-to-market pricing andliquidity

  5. „Too big to fail” • Micro prudential policies • Reduction of pro-cyclicality (amplitude of credit cycles) • Automatic countercyclical mechanism vs. discretionary interventions • Scope of banking operations (the Volcker’s Rule) • Systemic important institution (requirements and costs) • Taxation of banking sector • Consumer protection law • Bank capital • Liquidity • Risk management • International cooperation

  6. Liquidity • International cooperation • Risk management • Trading book capital • Securitization risk weights • Improvement of guidance on management and supervision • Compensation system • Concentration of risk • Principles of cooperation (G-20, FSB – Standard Setters, BIS, IMF, EU) • Supervisory colleges • EU attempts to strengthen supervision

  7. New framework – proposals • Quality and transparency of capital base • Reduction of Basel II build-in pro-cyclicality • Counter cyclical capital buffer • Capital conservation buffer • Leverage ratio • Forward looking provisioning • New liquidity measures

  8. Hedge funds • Revision of Code of Conduct Fundamentals • Differentiated ratings on structured products • Conflict of interests • Minimum standards • Systemic monitoring

  9. Accountancy standards • Standardization of products • Integrated clearing system • Alternative approach to mark-to-market system • Transparent standards for off-balance sheet vehicles

  10. Emerging market countries • Originate-to-distribute model • Collateralized Debt Obligation (securitization) • Structured Investment Vehicle (SIV) • OTC market and wholesale financing system • Abrupt outflow of foreign saving • Long-term assets denominated in foreign currency • Finance innovation (F/X options)

  11. Quality and transparency of capital base • Fair competition (based on risk not reputation) • Hybrid capital (subordinated debt in foreign currency) • Subsidiary vs. branch model • Reform of Basel II • Risk weights(standardized vs. internal rating-based approach) • Pro-cyclicality (F/X sensitivity) • Counter cyclical capital buffer • Flexibility of automatic stabilizers definition

  12. Capital conservation buffer • Specific risks - role for domestic supervisor • Leverage ratio • Domination of standardized approach • Forward looking provisioning • System based on domestic risk assessment • New liquidity measures • Phasing-in mechanism

  13. European Systemic Risk Board • Domination of central banks (monetary policy vs. financialstability function) • Early warning system (practical solution?) • Communication (via non-binding recommendations) • European System of Financial Supervisors (ESFS) • Structure (built on Lamfalusy structures) • Sectoral vs. national supervisors (balance of powers)

  14. European Supervisory Authorities • Single rule book (binding technical standards) • Interpretation of regulations • Mediation (even addressing individual financial institution) • Colleges of Supervisors • Supervision of cross-border groups (day-to-day supervision) • European systemic institutions

  15. Crisis resolution • Cross-border insolvency • Selection of institutions (financial viability criterion?) • Models of resolution („bad” bank, guaranty of price of assets, transfer of assets) • Pan-European Deposit Guarantee Scheme • Structure (domestic vs. Pan-European) • Coverage (cross-border operation) • Funding (ex-ante contribution) • Membership (compulsory) • Fiscal responsibility of last resort • Potential arbitrage (subsidiary vs. branch)

More Related