What has changed since the financial crisis of 2008 that makes the financial system sound at last? Is regulatory reform going in the right direction? Has it run its course?
Bruegel, the Centre for Economic Policy Research, and the European Center for Advanced Research in Economics and Statistics are co-hosting this event about the aftermath of the 2008 economic crisis. The legacy of the crisis is stronger and better capitalized banks, as well as regulators and supervisors with increased clout who pay more attention to systemic risk. However, the crisis has also left us with high leverage in advanced economies, especially in terms of sovereign dept over GDP. At the same time, interest rates are at very low levels. All of this, together with the digital disruption of the sector, poses formidable challenges for the banking industry.
This event will feature the first report in the IESE/CEPR Future of Banking series report, tackling three important areas of post-crisis regulatory reform: Basel III and its aftermath; resolution procedures to end ‘too big to fail’; and expanding the role of central banks with a financial stability remit. The report presents an extensive analysis of the banking sector and the regulatory reforms put in place since the crisis.
At this event, several central messages of the report will be discussed:
The event will be livestreamed. There is no need to register for the livestream.
Check-in and lunch
Research Fellow, CEPR
Professor, Université libre de Bruxelles - ECARES
Professor, IESE Business School and Research Fellow, CEPR
How is a successful European Monetary Union still possible in today's ever-shifting political landscape? What reforms need to occur in order to guarantee success of cohesive policies?
What challenges does a shift towards new payment processes imply for EU financial services policy?
Longer-term yields falling below shorter-term yields have historically preceded recessions. Last week, the US 10-year yield was 21 basis points below the 3-month yield, a feat last seen during the summer of 2007. Is the current yield curve a trustworthy barometer for future growth?
The Chinese yuan has been under pressure in recent days due to the slowing economy and, more importantly, the escalating trade war with the US. While the Peoples Bank of China has never said it will safeguard the dollar-yuan exchange rate against any particular level, many analysts have treated '7' as a magic number and heated debates have begun over whether the number is unbreakable.
Investors and the public have been looking at the renminbi with caution after the Trump administration threatened to increase duties on countries that intervene in the markets to devalue/undervalue their currency relative to the dollar. The fear is that China could weaponise its currency following the further increase in tariffs imposed by the United States in early May. What is the likelihood of this happening and what would be the consequences for the existing tensions with the United States, as well as for the global economy?
Europe’s largest banks have made progress in issuing bail-inable securities that shelter taxpayers from bank failures. But the now-finalised revision of the bank resolution directive and a new policy of the SRB will make requirements to issue such securities more onerous for other banks. In order to strengthen banking-system resilience, EU capital-market regulation should facilitate exposures of long-term institutional investors.
What shape is the new financial continent of Europe?
The Single Resolution Board (SRB) has had a somewhat difficult start but has been able to learn and adapt, and has gained stature following its first bank resolution decisions in 2017-18. It must continue to build up its capabilities, even as the European Union’s banking union and its policy regime for unviable banks continue to develop.
With looser monetary policy, China's policymakers hope to encourage banks to lend more to the private sector. This seems to imply a change from the deleveraging drive begun in mid-2017. Although this should be good news for China's growth in the short term, such a continued accumulation of debt cannot but imply deflationary pressures and a lower potential growth further down the road.
The ECB’s market-neutral approach to monetary policy undermines the general aim of the EU to achieve a low-carbon economy. An alternative tilting approach would foster low-carbon production, accelerating the transition of the EU to a low-carbon economy, and could be implemented without undue interference with the chief aim of price stability.
Bruegel fellow Dirk Schoenmaker walks Sean Gibson and 'The Sound of Economics' listeners through his latest working paper, focusing on how to make monetary policy in Europe more climate-friendly
The author proposes a tilting approach to steer the allocation of the Eurosystem’s assets and collateral towards low-carbon sectors, which would reduce the cost of capital for these sectors relative to high-carbon sectors. Central banks have already started to look at climate-related risks in the context of financial stability. Should they also take the carbon intensity of assets into account in the context of monetary policy?