Financial Markets


151 - 180 of 423
23 June 2009

The global financial crisis has put an end to the cosy environment in which the financial industry had operated up to now. In keeping with their G-20 commitment, the European Commission has published draft rules for hedge funds, which bring all non-harmonised funds under the EU’s regulatory umbrella, largely reproducing the rules of existing directives, and adding some new elements in response to the crisis.

22 June 2009

Following publication of the de Larosière report in February 2009, the EU machinery has finally swung into action and is now delivering concrete proposals for the much-needed new European architecture for financial supervision.

08 June 2009

First published in 1992, CEPS has elected to republish this paper some 17 years later in its entirety, given its continued relevance to the EU’s struggle to reform its system of financial supervision in the wake of the financial crisis. A special Foreword by Daniel Gros explains the foresight of Sydney Key and places her analysis in the context of 2009.

04 June 2009

The financial crisis has sharpened the debate on Europe’s back office architecture. This paper reviews the ECB’s decision to proceed with its Target 2 Securities (T2S) project, which aims to establish a common IT platform for securities settlement, reducing differences between current infrastructures. The apparently solid configuration of the project shakes, however, when we closely examine the impact of this common infrastructure on the competitive landscape.

29 May 2009

Fears of systemic meltdown following the collapse of Lehman Brothers in September 2008 led to uncoordinated regulatory interventions around the world to ban or restrict short selling, a technique that allows one to profit from falling stock prices. The suspicion that ‘bear raids’ were having a negative impact on stock prices in general and financial stocks in particular motivated these regulatory developments. The ban on short selling reignited a long-standing debate on this controversial technique.

27 May 2009

Now, almost two years into the worst financial crisis in Europe’s recent history, CEPS CEO Karel Lannoo finds that the EU seems to be incapable of drawing the necessary lessons. If Europe is serious about tackling the crisis and wants to be seen as such, he argues that it needs to make proposals for a European system of financial supervisors, not a network. This means empowering a strong centre which can, following the principle of subsidiarity, effectively and unequivocally act on behalf of the European interest and police national supervisory authorities.

07 May 2009

This paper explores three areas in which the experience of the Great Depression might be relevant today: monetary policy, fiscal policy and the systemic stability of the banking system.

09 April 2009

While acknowledging that the G-20 meeting in London achieved remarkable success in laying the foundations for sound global governance, CEPS Chief Executive Karel Lannoo asks in this CEPS Commentary whether the world’s leaders will be able to deliver, given the hugely ambitious agenda they have set for themselves and in light of the fact that they remain a limited group of nations.

03 April 2009

Until the eruption of the credit crisis in August 2007 financial markets were gripped by a ‘flight to risk’. The perception was that risks were very low. This perception was fed by the rating agencies that liberally distributed top ratings to dubious assets. Dulled by this low risk perception, investors and financial institutions accumulated vast amounts of risky assets on their balance sheets. Today the markets have moved to the other extreme and perceive risks everywhere. They are now gripped by a ‘flight to safety’.

02 April 2009

The world needs a watchdog institution for global economic stability. Most agree that the IMF is the only serious candidate, but IMF management and staff need more independence. This column argues that this could be achieved by having separate Executive Board voting procedures for lending and analytic decisions, and some independent members on the Board.

24 March 2009

With the aim of restoring a strong global framework for economic governance, this study proposes new rules of the game – imposed through the Group of 20 and the IMF – for the macroeconomic and exchange rate policies of the main players, including the United States. It also advocates stricter prudential rules for banks, centred around the introduction of a simple leverage ratio calculated with reference to total assets, with no exemptions or risk mitigation.

03 March 2009

This Commentary assesses the report by the high-level group on financial supervision, chaired by former IMF Managing Director and Bank of France Governor Jacques de Larosière. The author, CEPS CEO Karel Lannoo, finds that the group’s recommendations offer a useful first step, but that its proposals need to be clarified and simplified, and their implementation accelerated. In his view, the report should lead to a clear roadmap to be adopted by the EU Council and some choices need to be thought through more carefully, procedures more fully specified and structures elaborated.

02 March 2009

The Payment Services Directive (PSD) was published in late 2007, constituting the legal basis for the Single Euro Payments Area (SEPA). The industry initiative launched on 28 January 2008 aims at replacing fragmented national markets for payment services with one integrated system. Although deadlines for both the transposition of the PSD into national law and the full availability for SEPA standards are set, many questions lack clear answers and need to be addressed accordingly.

23 February 2009

During the decade preceding the eruption of the financial crisis in August 2007, rating agencies and market participants, gripped by euphoria, systematically underestimated the risk inherent in a wide range of financial assets. Today the panic that has gripped them leads to an equally distorted view of the risks involved. Private debt is dumped in favour of government debt of just a few countries. How these countries are selected is unclear.

13 February 2009

Credit ratings are a quasi-public good, and investors and financial markets regulators need an independent assessment of the credit-worthiness of an issuing entity because of information asymmetries and principal agent problems. In light of the high volatility of market-based measures and the failure of internal risk management, private CRAs are best fit for purpose. However, natural barriers of entry in the rating business and conflicts of interest have led to an inflation of ratings and a deterioration in their quality. It would thus appear that CRAs need closer supervision.

13 February 2009

CEPS Director Daniel Gros looks at the reported €270 billion in intangible assets reported on the balance sheets of the 12 largest European banks and wonders whether the "fair value" of this hot air in today's market circumstances could be close to zero.

11 February 2009

CEPS Chief Executive looks at the large differences that remain in the risk management of European banks and in the way bank regulation is implemented. Drawing on comparisons between Spanish banks and their counterparts elsewhere in Europe, he concludes that more integrated European oversight, if it happens, will need to be elaborated very carefully and accurately. This means a watertight structure, an accountable management and a clear division of responsibilities.

05 February 2009

Daniel Gros argues in this Commentary that the key choice facing the US government is the fundamental one between muddling through with partial recapitalization schemes that leave banks alive, but too weak to lend or a big bang approach that clears balance sheets and allows the survivors to resume lending without looking back.

27 January 2009

In a new CEPS Commentary, Paul De Grauwe takes rating agencies to task for having systematically rewarded companies for taking too much risk in the past and for punishing companies today for taking too little, thereby exacerbating the financial crisis. The author is Professor of Economics at the University of Leuven and Senior Research Fellow at the Centre for European Policy Studies.

07 January 2009

This paper provides the first empirical evidence of fairness opinions in Europe. Legal requirements concerning the use of fairness opinions in mergers and acquisitions are significantly different in Germany, Switzerland and Austria. We examine the determinants of fairness opinions for target firms in these various regulatory settings, and moreover, investigate the impact of such opinions on the abnormal returns of target firms. While in Germany and Austria market participants do not deem fairness opinions important, they do create value for shareholders in Switzerland.

15 December 2008

This paper argues that transparency-boosting measures specifically tailored to commodity and commodity derivatives markets are much needed. In particular, encouraging the creation of a clearing infrastructure for OTC commodity and commodity derivatives markets would be desirable. Moreover, EU regulators should consider setting up a new, more effective market abuse regime aimed at preventing manipulation in both the physical and financial commodities markets.

01 December 2008

The financial crisis exposed dangerous weaknesses in the regulatory and oversight structure that need to be urgently corrected to restore confidence in the financial system and to keep the single market alive. Towards this end, this CEPS Task Force report puts forward three main policy recommendations to the EU:
1) The European Council should formally mandate the High-Level Expert Group on EU financial supervision to analyse the optimal structure of financial oversight and propose concrete steps leading to a European System of Financial Supervisors;

14 November 2008

In his Commentary published in the run-up to the G20 summit in Washington on 15 November 2008, CEPS Director Daniel Gros attributes the global financial crisis to two macroscopic failures: monetary policy should have reacted earlier to the boom in house prices and regulators should have forced banks to accumulate larger reserves for the tougher times that had to come sooner or later. He asserts that the root causes for these failures need to be understood properly before trying to create a new Bretton Woods.

14 November 2008

In this Commentary addressed to the G20 leaders meeting in Washington on November 15th, Paul De Grauwe argues that the solution to the financial crisis is to restrict banks to traditional, narrow banking with traditional oversight and guarantees while requiring financial firms involved in financial markets to more closely match the average maturities of their assets and liabilities.

30 October 2008

As Europe faces the worst economic and financial crisis since World War II, the usual decision-making mechanisms are clearly overwhelmed. This commentary asserts that Europe needs action on a scale that can only be decided at the highest political level, namely the formation of a massive European Financial Stability Fund (EFSF) to issue bonds on the international market with the explicit guarantee of member states.

28 October 2008

The ECRI Database on Banking Codes of Conduct is a collection of valuable information on established codes of conduct in Europe, covering all 27 member states. The interactive Excel tool provides its user with a list of the codes per country, with information on the initiating organization/institution, a short description, content and further annotations. The database was created by ECRI in August 2008, depending on the availability of information from national financial associations and authorities. With the purchase of the ECRI Database, access to codes will be provided as well.

21 October 2008

Some have argued that the financial crisis has set back progress in EU integration by 15 years. CEPS Chief Executive argues in this Commentary that the EU can demonstrate that this is not the case by rapidly drawing the lessons from the crisis and taking it as a challenge for a further step in European integration. He acknowledges that this will require plenty of effort and determination, but it will certainly benefit the EU’s financial services industry and economy.

14 October 2008

In assessing the October 12th euro area summit, Daniel Gros applauds the national leaders for taking decisive action that avoided a total breakdown in the short run, but laments the fact that the cost of the lack of fiscal solidarity will set back the integration of European financial markets by decades.

10 October 2008

In this commentary, Paul De Grauwe traces the origins of the turmoil in the global financial system and explores how to get out of this bad equilibrium. In his view, there is only one way: the governments of the major countries (US, UK, the eurozone, possibly Japan) must take over their banking systems (or at least the significant banks). Governments are the only institutions that can solve the co-ordination failure at the heart of the liquidity crisis. They can do this because once the banks are in the hands of the state, they can be ordered to trust each other and to lend to each other.

10 October 2008

On the eve of the G7 meetings in Washington, Daniel Gros and Stefano Micossi find that what is missing is a body or a concerted initiative to take care of the inter-bank market, which has become dysfunctional almost everywhere. They warn that the G-7 governments must tackle this issue or be prepared to witness the funding crisis mutate into a global depression.