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Article
Publication date: 10 July 2017

Dirk Schoenmaker

Large global banks were at the heart of the global financial crisis. In response to the crisis, the Financial Stability Board published an integrated set of policy…

Abstract

Purpose

Large global banks were at the heart of the global financial crisis. In response to the crisis, the Financial Stability Board published an integrated set of policy measures, such as capital surcharges, to address the systemic and moral hazard risks associated with global systemically important banks (G-SIBs). Almost 10 years later, it is time to take stock of the impact of these measures. This paper answers three questions on what happened to the G-SIBs. First, have they shrunk in size? Second, are they better capitalised? Third, have they reduced their global reach?

Design/methodology/approach

This paper looks at the individual G-SIBs and compares the situation before the crisis with the current situation. In this methodology, the differences because of changes at individual banks and changes in the ranking within the group (composition effect) are disentangled. Data have been collected on these banks from SNL Financial (banking database) and annual reports.

Findings

First, a substantial increase in capital levels is seen, though the distribution is uneven. China and USA are leading the pact with leverage ratios (Tier 1 capital divided by total assets) of around 7 per cent for their large banks, whereas Europe and Japan are trailing behind with ratios between 4 and 5 per cent. Second, a strong composition effect is identified: a shift of business from the global European banks to the more domestic Asian banks, which are gradually increasing their global reach. The US banks keep their strong position. So, the decline in cross-border banking is largely because of a composition effect (i.e. a reshuffle of the global banking champions league) and far less due to a reduced global reach of individual banks.

Research limitations/implications

From the results on capital, recommendations are made on capital requirements (see below at social implications).

Social implications

It is noted that the euro area, Japan, Sweden and Switzerland trail behind with a leverage ratio between 4 and 5 per cent. It is recommended these countries bring the leverage ratio of their largest banks more in line with international practice.

Originality/value

The effects of the reform after the global financial crisis on the large global banks have not been researched in detail. This paper split the results by country of incorporation (home country). This gives interesting differences, which the paper relates to specific policies (or lack of policies) in these countries.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 3
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 1 June 2004

Donato Masciandaro

The objective of this work is to analyse worldwide trends in financial supervision architectures. The focus is on the key issue in the debate – the single supervisor…

Abstract

The objective of this work is to analyse worldwide trends in financial supervision architectures. The focus is on the key issue in the debate – the single supervisor versus multiauthority model – in order to build up indexes of supervision unification, essential to perform studies on the causes and effects of various supervisory regimes. First, the paper introduces a Financial Authorities’ Concentration (FAC) Index. A comparative analysis of 69 countries confirmed that an increase in the degree of concentration of supervisory powers is evident in the developed countries, and particularly in the European Union. Secondly, the paper considers the nature of the institutions to which control responsibilities are entrusted. In particular, the role the central bank plays in the various national institutional settings is examined. An index of the central bank’s involvement in financial supervision is introduced, the Central Bank as Financial Authority (CBFA) Index. Each national institutional structure can be identified with the two above characteristics. Two models are the most frequent: (a) countries with a high level of unification of powers and weak central bank involvement (single financial authority regimes); and, (b) countries with a low level of unification of powers and strong central bank involvement (central bank dominated multiple supervisor regimes). A trade‐off therefore emerges between the degree of financial sector unification and the role of the central bank. Two possible explanations of this relationship emerged: the blurring hazard effect and the monopolistic bureau effect.

Details

Journal of Financial Regulation and Compliance, vol. 12 no. 2
Type: Research Article
ISSN: 1358-1988

Keywords

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Abstract

Details

International Journal of Commerce and Management, vol. 25 no. 2
Type: Research Article
ISSN: 1056-9219

Keywords

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Article
Publication date: 13 November 2017

Stephan Fahr and John Fell

The global financial crisis demonstrated that monetary policy alone cannot ensure both price and financial stability. According to the Tinbergen (1952) rule, there was a…

Abstract

Purpose

The global financial crisis demonstrated that monetary policy alone cannot ensure both price and financial stability. According to the Tinbergen (1952) rule, there was a gap in the policymakers’ toolkit for safeguarding financial stability, as the number of available policy instruments was insufficient relative to the number of policy objectives. That gap is now being closed through the creation of new macroprudential policy instruments. Both monetary policy and macroprudential policy have the capacity to influence both price and financial stability objectives. This paper develops a framework for determining how best to assign instruments to objectives.

Design/methodology/approach

Using a simplified New-Keynesian model, the authors examine two sets of policy trade-offs, the first concerning the relative effectiveness of monetary and macroprudential policy instruments in achieving price and financial stability objectives and the second concerning trade-offs between macroprudential policy instruments themselves.

Findings

This model shows that regardless of whether the objective is to enhance financial system resilience or to moderate the financial cycle, macroprudential policies are more effective than monetary policy. Likewise, monetary policy is more effective than macroprudential policy in achieving price stability. According to the Mundell (1962) principle of effective market classification, this implies that macroprudential policy instruments should be paired with financial stability objectives, and monetary policy instruments should be paired with the price stability objective. The authors also find a trade-off between the two sets of macroprudential policy instruments, which indicates that failure to moderate the financial cycle would require greater financial system resilience.

Originality/value

The main contribution of the paper is to establish – with the help of a model framework – the relative effectiveness of monetary and macroprudential policies in achieving price and financial stability objectives. By so doing, it provides a rationale for macroprudential policy and it shows how macroprudential policy can unburden monetary policy in leaning against the wind of financial imbalances.

Details

Journal of Financial Regulation and Compliance, vol. 25 no. 4
Type: Research Article
ISSN: 1358-1988

Keywords

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Article
Publication date: 15 June 2020

Nils Grashof, Alexander Kopka, Colin Wessendorf and Dirk Fornahl

This paper aims to show the interaction effects between clusters and cluster-specific attributes and the industrial internet of things (IoT) knowledge of a firm on the…

Abstract

Purpose

This paper aims to show the interaction effects between clusters and cluster-specific attributes and the industrial internet of things (IoT) knowledge of a firm on the innovativeness of firms. Cluster theory and the concept of key enabling technologies are linked to test their effect on a firm’s incremental and radical knowledge generation.

Design/methodology/approach

Quantitative approach at the firm-level. By combining several data sources (e.g. ORBIS, PATSTAT and German subsidy catalogue) the paper relies on a unique database encompassing 8,347 firms in Germany. Ordinary least squares (OLS)-regression techniques are used for data analysis.

Findings

Industrial IoT is an important driver of radical patents, mediated positively by firm size. For incremental knowledge, a substitution effect occurs between a cluster and IoT effects, which is bigger for larger firms and dependent on cluster attributes and firms’ outside connections.

Research limitations/implications

The paper opens up new research paths considering long-term disruptive effects of the industrial IoT compared to short-term effects on the innovativeness of firms within clusters. Additionally, it enables further research enriching the discussion about cluster attributes and how these affect ongoing processes.

Practical implications

Linking cluster theory and policy with Industry 4.0 raises awareness for being considerate in terms of funding and scrutinising one-size-fits-all approaches.

Originality/value

Connecting the concepts of a cluster and advanced manufacturing technologies as a proxy for industrial IoT, specifically focussing on both radical and incremental innovations is a new approach. Especially, taking into account the interaction effects between cluster attributes and the influence of industrial IoT on the innovativeness of firms.

Details

Competitiveness Review: An International Business Journal , vol. 31 no. 1
Type: Research Article
ISSN: 1059-5422

Keywords

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