Shadow Financial Regulatory Committee Research Articles

George Kaufman: Both Hands In; Scholar’s Work with Academia and Financial Industry Benefitted Both

This paper examines the career of economist Prof. George Kaufman, whose work combined and benefited both academia and the financial industry, helping both better understand the problems of financial stability, financial regulation, and financial sector competition. In doing so, he brought together great minds from both fields and helped many economists progress in their careers. Prof. Kaufman promulgated the idea that government policy needed to foster two simple goals: proper incentives and competitive markets. He believed the combination would produce a richer society and more stable economy. He created the U.S. Federal Reserve’s Conference on Bank Structure and Competition, the leading conference in the world addressing financial regulatory issues for 50 years. Prof. Kaufman also founded the U.S. Shadow Financial Regulatory Committee in 1986 in the midst of the thrift crisis, helping to solve that crisis and inspiring the creation of other shadow financial regulatory committees around the world. Through his activities, he left behind an outstanding legacy of leadership, research, and opinion in various economic fields, providing platforms upon which many scholars will build in the coming decades.

Raising bank loss absorption capacity through equity capital or bail-in debt

PurposeBased upon recent statements made by the European Shadow Financial Regulatory Committee, a group of well-known professors coming from ten European countries, during the period 2012-2017, this paper aims to analyze from a European perspective the adequacy and credibility of the proposed framework.Design/methodology/approachThis paper is a summary and interpretation of statements from the European Shadow Financial Regulatory Committee.FindingsThe authors argue that the credibility of the bail-in mechanism is likely to be limited. Because of this, unexpected losses may not be absorbed by unsecured debt holders. Therefore, there is still a need for relatively high equity capital buffers.Originality/valueThe issue of how to raise loss absorption capacity for banks is prominent on the international policy agenda. International regulators are aiming for a combination of equity capital, typically raised by issuing shares, retaining profits and issuing contingent convertible (CoCo) bonds and bail-in debt where unsecured creditors such as holders of subordinated and common bonds are supposed to take losses in case of a bankruptcy or restructuring of a bank.

Regulatory response to the financial crisis in Europe: recent developments (2010-2013)

Purpose – The purpose of this paper by the European Shadow Financial Regulatory Committee (ESFRC) is to provide an account of the financial crisis in Europe during the period 2010-2013 and an analysis of how the relevant authorities reacted to the crisis. Design/methodology/approach – These actions included measures taken by central banks, governments or fiscal authorities, and by regulatory or supervisory bodies. In a previous study covering the regulatory developments during the financial crisis up until 2009, issues such as the implementation of Basel III rules in Europe and the (mostly ad hoc and unilateral) resolution mechanisms set in most European countries to fight the crisis were covered. This study focuses on developments since 2010 with a focus on the concerns and actions that emerged with the sovereign debt crisis in the euro area. In particular, the transition from the European Financial Stability Facility to the European Stability Mechanism is assessed. The focus after 2012 has progressively turned to the challenges of the European banking union. Findings – These issues are jointly covered, along with some updates on the views of the ESFRC on recent advances in other areas, such as solvency regulation. All in all, the authors find that the weaknesses of the global financial system remain to be addressed, and they believe that the banking union is one of the main tools and opportunities for an improved and efficient crisis management in Europe. Originality/value – The paper aims at contributing to the study of financial regulation after the banking crisis. The experience of the euro zone in this context is assessed in this article from a wide range of perspectives.

Les propositions du European Shadow Financial Regulatory Committee sur l'Action corrective précoce en Europe

Résumé Le European Shadow Financial Regulatory Committee ( esfrs ) a réitéré, dans son rapport du 20 novembre 2006 intitulé « Basel II and the Scope for Prompt Corrective Action in Europe », sa proposition d’instaurer dans l’Union européenne une politique d’actions correctives précoces sur un modèle apparenté au cas américain. Nous présentons dans cet article une analyse de cette proposition en montrant que son adoption aurait des implications sur les autres constituants du filet de sécurité financière européen allant bien au-delà de ce que reconnaît le esfrc .

European Shadow Financial Regulatory Committee

European Shadow Financial Regulatory Committee

A New Era at the Inter-American Development Bank: Six Recommendations for the New President

How should the Inter-American Development Bank (IDB) respond to the challenges of the new century? As recently as the early 1990s, governments and policymakers in Latin America and the Caribbean relied on the IDB and other multilateral institutions not only as important sources of finance but also for ideas and technical assistance in designing economic policies. Partly as a result of this advice, many countries implemented wide-ranging market-oriented reforms to accelerate their integration into the world economy. But the perception grew that the agenda advised by Washington and the multilaterals did not represent the interests of the region. The failure of the reforms to fully satisfy expectations for more rapid growth and poverty reduction heightened tensions. Meanwhile, countries developed stronger local economic expertise, vastly improving the quality of the domestic policy debate.As a result, the market for the IDB’s services has changed dramatically. Rapid growth in private capital flows has made its financial resources less important than in the past. And political leaders are increasingly articulating their own vision on how to bring about inclusive growth in Latin America and the Caribbean, thereby reducing their need for advice from Washington. Yet the region is struggling with complex economic challenges that cannot adequately be addressed by individual nations or regional groupings, such as the Organization of American States. And there is no shortage of problems to be solved. The IDB’s mission of promoting inclusive growth is closely aligned with the region’s most pressing needs.The selection of a new president to lead the IDB presents an opportunity for the institution to reassess its role and reshape its products and services to better address current challenges. In response to this opportunity, the Latin American Shadow Financial Regulatory Committee (CLAAF) and the Center for Global Development prepared this report for Luis Alberto Moreno, the new president of the IDB. This Report lays out key challenges facing the institution, explains how the Bank is uniquely poised to address them, and offers six recommendations for the new president to consider as he launches what can and should be a new era at the IDB.

Designing financial regulatory policies that work for Latin America: the role of markets and institutionsViews from the Latin American Shadow Financial Regulatory Committee

Abstract Emerging market economies have undergone an extraordinary period of turbulence in capital markets during the period 1997–2002, and volatility remains a salient feature of the financial landscape. This paper discusses a number of central issues for the future of the region's financial markets. It starts with a brief summary of the reforms undertaken and shows that financial systems still remain fragile in a number of countries in the region. The paper then advances policy recommendations to strengthen domestic financial systems. The analysis and policy prescriptions aim at three areas: 1) the appropriate design of regulatory and supervisory institutions; 2) the role of foreign banks; and 3) how international financial practices affect Latin America.

Europe's single market for financial services: views by the European Shadow Financial Regulatory Committee

Although the world of banking and finance is becoming more integrated every day, in most aspects the world of financial regulation continues to be narrowly defined by national boundaries. The main players here are still national governments and governmental agencies. And until recently, they tended to follow a policy of shielding their activities from scrutiny by their peers and members of the academic community rather than inviting critical assessments and an exchange of ideas. The turbulence in international financial markets in the 1980s, and its impact on US banks, gave rise to the notion that academics working in the field of banking and financial regulation might be in a position to make a contribution to the improvement of regulation in the United States, and thus ultimately to the stability of the entire financial sector. This provided the impetus for the creation of the “US Shadow Financial Regulatory Committee”. In the meantime, similar shadow committees have been founded in Europe, Japan and Latin America. The specific problems associated with financial regulation in Europe, as well as the specific features which distinguish the European Shadow Financial Regulatory Committee (ESFRC) from its counterparts in the US and Japan, derive from the fact that while Europe has already made substantial progress towards economic and political integration, it is still primarily a collection of distinct nation–states with differing institutional set-ups and political and economic traditions. Therefore, any attempt to work towards a European approach to financial regulation must include an effort to promote the development of a European culture of co-operation in this area, and this is precisely what the European Shadow Financial Regulatory Committee seeks to do. In this paper, Harald Benink, chairman of the ESFRC, and Reinhard H. Schmidt, one of the two German members, discuss the origin, the objectives and the functioning of the committee and the thrust of its recommendations.

Designing financial regulatory policies that work for Latin America: the role of markets and institutions: Views from the Latin American Shadow Financial Regulatory Committee

Emerging market economies have undergone an extraordinary period of turbulence in capital markets during the period 1997–2002, and volatility remains a salient feature of the financial landscape. This paper discusses a number of central issues for the future of the region's financial markets. It starts with a brief summary of the reforms undertaken and shows that financial systems still remain fragile in a number of countries in the region. The paper then advances policy recommendations to strengthen domestic financial systems. The analysis and policy prescriptions aim at three areas: 1) the appropriate design of regulatory and supervisory institutions; 2) the role of foreign banks; and 3) how international financial practices affect Latin America.

Das European Shadow Financial Regulatory Committee: Ein Beitrag zur Regulierungskultur in Europa

AbstractThe turbulence in the international financial markets in the 1980s inspired the idea that independent academics might be in a position to make a contribution to the improvement of regulation and thus ultimately also to the stability of the national financial sector in the United States. This led to the creation of the US “Shadow Financial Regulatory Committee“, a group of academics and other independent experts working in the field of financial regulation, which meets regularly and issues statements concerning conceptual as well as current issues in financial regulation. Two years ago, a similar shadow committee was founded in Europe. It is composed of members from 11 different countries. The special problems of financial regulation in Europe, as well as the special features of the European Shadow Financial Regulatory Committee (ESFRC), derive from the fact that despite the trend towards economic and political integration, Europe is still a collection of different nations with different institutional set-ups and political and economic traditions. In this paper, Harald Benink, chairman of the ESFRC, and Reinhard H. Schmidt, one of the two German members, describe the origin, the objectives and the functioning of the committee and the thrust of its recommendations.

STOCK INDEX FUTURES AND THE CRASH OF '87

Journal of Applied Corporate FinanceVolume 1, Issue 4 p. 6-17 STOCK INDEX FUTURES AND THE CRASH OF '87 Merton H. Miller, Merton H. Miller Robert R. McCormick Distinguished Service Professor at the University of Chicago's Graduate School of Business. He is a past President of the American Finance Association, as well as one of the three editors of the Journal of Business.Search for more papers by this authorBurton Malkiel, Burton Malkiel Frank E. Buck Professor of Finance at Stanford University's Graduate School of Business. Before coming to Stanford, he was Professor of Banking and Finance at the University of Chicago's Graduate School of Business. He is also the co-originator, with Fischer Black, of the Black-Scholes Option Pricing Model that is discussed throughout this issue.Search for more papers by this authorMyon Scholes, Myon Scholes Chemical Bank Professor and Chairman of the Economics Department at Princeton University. Professor Malkiel is also author of the economics best-seller, A Random Walk Down Wall Street.Search for more papers by this authorJohn D. Hawke JK., John D. Hawke JK. Senior Partner at Arnold & Porter, Washington, D.C. He served as General Counsel to the Board of Governors of the Federal Reserve System from 1975 to 1978. Mr. Hawke, who speaks and writes frequently on issues of financial regulation, is a member of the Shadow Financial Regulatory Committee and has taught courses in financial regulation at Georgetown University Law School and the Morin Center for Banking Law Studies at Boston University School of Law.Search for more papers by this author Merton H. Miller, Merton H. Miller Robert R. McCormick Distinguished Service Professor at the University of Chicago's Graduate School of Business. He is a past President of the American Finance Association, as well as one of the three editors of the Journal of Business.Search for more papers by this authorBurton Malkiel, Burton Malkiel Frank E. Buck Professor of Finance at Stanford University's Graduate School of Business. Before coming to Stanford, he was Professor of Banking and Finance at the University of Chicago's Graduate School of Business. He is also the co-originator, with Fischer Black, of the Black-Scholes Option Pricing Model that is discussed throughout this issue.Search for more papers by this authorMyon Scholes, Myon Scholes Chemical Bank Professor and Chairman of the Economics Department at Princeton University. Professor Malkiel is also author of the economics best-seller, A Random Walk Down Wall Street.Search for more papers by this authorJohn D. Hawke JK., John D. Hawke JK. Senior Partner at Arnold & Porter, Washington, D.C. He served as General Counsel to the Board of Governors of the Federal Reserve System from 1975 to 1978. Mr. Hawke, who speaks and writes frequently on issues of financial regulation, is a member of the Shadow Financial Regulatory Committee and has taught courses in financial regulation at Georgetown University Law School and the Morin Center for Banking Law Studies at Boston University School of Law.Search for more papers by this author First published: Winter 1989 https://doi.org/10.1111/j.1745-6622.1989.tb00170.xCitations: 6Read the full textAboutPDF ToolsRequest permissionExport citationAdd to favoritesTrack citation ShareShare Give accessShare full text accessShare full-text accessPlease review our Terms and Conditions of Use and check box below to share full-text version of article.I have read and accept the Wiley Online Library Terms and Conditions of UseShareable LinkUse the link below to share a full-text version of this article with your friends and colleagues. Learn more.Copy URL Share a linkShare onFacebookTwitterLinked InRedditWechat Citing Literature Volume1, Issue4Winter 1989Pages 6-17 RelatedInformation

INTERNATIONAL DEBT PROBLEMS

A long‐term solution to the international debt problem is achieved when debtor countries can return to the marketplace without assistance or negotiation with foreign governments and international agencies. The prospects of major debtors' returning are very different and are most likely for Brazil. Various proposals are discussed, including proposals to exchange bank loans at market value for equity. Secretary Baker s proposal, which is opposed by the Shadow Financial Regulatory Committee, is also discussed.