Search Results
Speech
Supervisory reform for global banks
Remarks at the Center for Transnational Legal Studies Seminar on the Impact of U.S. Regulatory Reform on Global Banks, New York City.
Report
Shadow banking regulation
Shadow banks conduct credit intermediation without direct, explicit access to public sources of liquidity and credit guarantees. Shadow banks contributed to the credit boom in the early 2000s and collapsed during the financial crisis of 2007-09. We review the rapidly growing literature on shadow banking and provide a conceptual framework for its regulation. Since the financial crisis, regulatory reform efforts have aimed at strengthening the stability of the shadow banking system. We review the implications of these reform efforts for shadow funding sources including asset-backed commercial ...
Journal Article
The history and rationale for a separate bank resolution process
Everyone recognizes the need to have a credible resolution regime in place for financial companies whose failure could harm the entire financial system, but people disagree about which regime is best. The emergence of the parallel banking system has led policymakers to reconsider the dividing line between firms that should be resolved in bankruptcy and firms that should be subject to a special resolution regime. A look at the history of insolvency resolution in this country suggests that a blended approach is worth considering. Activities that have potential systemic impact might be best ...
Speech
Five years since the crisis: where are we now?
Remarks at the Institute of International Bankers' Seminar on Risk Management and Regulatory/Examinations Compliance Issues.
Working Paper
Optimal disclosure policy and undue diligence
While both public and private financial agencies supply asset markets with large amounts of information, they do not generally disclose all asset-related information to the general public. This observation leads us to ask what principles might govern the optimal disclosure policy for an asset manager or financial regulator. To investigate this question, we study the properties of a dynamic economy endowed with a risky asset, and with individuals that lack commitment. Information relating to future asset returns is available to society at zero cost. Legislation dictates whether this ...
Discussion Paper
The role of banks in the transmission of monetary policy
The transmission of monetary policy, especially in light of recent events, has received increased attention, especially with respect to the efficacy of the bank lending channel. This paper summarizes the issues associated with isolating the bank lending channel and determining the extent to which it is operational. Evidence on the effectiveness of the bank lending channel is presented, both in the United States and abroad. The paper then provides observations about the likely consequences for the effectiveness of the lending channel of the changes in the financial environment associated with ...
Report
Robust capital regulation
Banks? leverage choices represent a delicate balancing act. Credit discipline argues for more leverage, while balance-sheet opacity and ease of asset substitution argue for less. Meanwhile, regulatory safety nets promote ex post financial stability, but also create perverse incentives for banks to engage in correlated asset choices and to hold little equity capital. As a way to cope with these distorted incentives, we outline a two-tier capital framework for banks. The first tier is a regular core capital requirement that helps deter excessive risk-taking incentives. The second tier, a novel ...
Speech
Taming the Too-Big-to-Fails: Will Dodd–Frank Be the Ticket or Is Lap-Band surgery required? (with reference to Vinny Guadagnino, Andrew Haldane, Paul Volcker, John Milton, Tom Hoenig and Churchill’s ‘Terminological Inexactitude’)
Remarks before Columbia University?s Politics and Business Club, New York City, NY, November 15, 2011 ; "I shall speak of the difficulty of treating [too big to fail] in a culture held hostage by concerns for 'contagion,' 'systemic risk' and 'unique solutions.' I will posit that preoccupation with these concerns leads to an ethic that coddles survival of the fattest rather than promoting survival of the fittest, to the detriment of social welfare and economic efficiency."
Journal Article
Regulation’s role in bank changes
This is the first article in a series which explores the changing role of banks in the financial intermediation process. It accompanies a Liberty Street Blog series. Both discuss the complexity of the credit intermediation chain associated with securitization and note the growing participation of nonbank entities within it. These series also discuss implications for monitoring and rulemaking going forward. In the article, the author argues that government involvement has been a significant factor in financial innovation and describes a number of the regulatory, legal, and policy decisions ...