Structural Reforms in Banking: The Role of Trading
Jan Pieter Krahnen, Felix Noth, Ulrich Schüwer
Journal of Financial Regulation,
No. 1,
2017
Abstract
In the wake of the recent financial crisis, significant regulatory actions have been taken aimed at limiting risks emanating from banks’ trading activities. The goal of this article is to look at the alternative reforms in the US, the UK and the EU, specifically with respect to the role of proprietary trading. Our conclusions can be summarized as follows: First, the focus on a prohibition of proprietary trading, as reflected in the Volcker Rule in the US and in the current proposal of the European Commission (Barnier proposal), is inadequate. It does not necessarily reduce risk-taking and it is likely to crowd out desired trading activities, thereby possibly affecting financial stability negatively. Second, trading separation into legally distinct or ring-fenced entities within the existing banking organizations, as suggested under the Vickers proposal for the UK and the Liikanen proposal for the EU, is a more effective solution. Separation limits cross-subsidies between banking and proprietary trading and diminishes contagion risk, while still allowing for synergies and risk management across banking, non-proprietary trading, and proprietary trading.
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09.03.2017 • 12/2017
Comment: Keep cool and be prepared – IWH president Gropp on the ECB’s interest rates decision
”The European Central Bank (ECB) decided to keep interest rates unchanged today. No surprise here. But Mario Draghi unfortunately did not provide a signal to markets that the ECB may be moving on interest rates in the foreseeable future. “This is a reasonable decision, but also a missed opportunity”, Reint E. Gropp, president of the Halle Institute for Economic Research (IWH) – Member of the Leibniz Association, says. “An ECB increase interest rate move must be well prepared, and today’s press conference would have been an opportunity to prepare markets for the fact that interest rates cannot stay where they are forever.”
Reint E. Gropp
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Assessing the Effects of Regulatory Bank Levies
Claudia M. Buch, Lena Tonzer, Benjamin Weigert
VOX CEPR's Policy Portal,
2017
Abstract
In response to the Global Crisis, governments have implemented restructuring and resolution regimes backed by funds financed by bank levies. Bank levies aim to internalise system risk externalities and to provide funding for bank recovery and resolution. This column explores bank levy design by considering the German and European cases. The discussion points to the importance of structured policy evaluations to determine the effects of levies.
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26.01.2017 • 8/2017
IWH Policy Talk „Faraway or Close? Supervisors and Central Bankers“
New after-work event series at IWH starts with Ignazio Angeloni, ECB
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Aktuelle Trends: Ungewöhnliche Zeiten in der Geldpolitik: Niedriges Zinsniveau begleitet von hohen Zentralbankreserven
Kirsten Schmidt, Lena Tonzer
Wirtschaft im Wandel,
No. 6,
2016
Abstract
Mit dem Ausbruch der Finanzkrise 2007/2008 und der sich anschließenden Staatsschuldenkrise kam es zu zahlreichen Veränderungen in der Implementierung der Geldpolitik im Euroraum. Oberstes Ziel der Europäischen Zentralbank (EZB) ist dabei die Wahrung der Preisstabilität und ein funktionierender Geldtransmissionsmechanismus.
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State Aid and Guarantees in Europe
Reint E. Gropp, Lena Tonzer
T. Beck, B. Casu (eds): The Palgrave Handbook of European Banking, London,
2016
Abstract
During the recent financial crisis, governments massively intervened in the banking sector by providing liquidity assistance and capital support to banks in distress. This helped stabilize the financial system in the short run. However, public bailouts also bear the risk of longer-term distortions, for example, by affecting bailout expectations of banks. In this chapter, the authors first provide an overview of state aid interventions during the recent crisis episode. The third section then analyzes the effects of state aid on financial stability from a theoretical view. This is followed by the description of results obtained from empirical studies. The link between the provision of state aid and politics is discussed in the section “Institutional Design and Policy Implications”. Finally, in the section “The European Banking Union” the authors describe the elements of the European Banking Union meant to resolve and restructure banks in distress and to lower the need for public intervention. Based on the preceding analysis, conclusions are drawn regarding the new design.
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European Bank Efficiency and Performance: The Effects of Supranational Versus National Bank Supervision
Rients Galema, Michael Koetter
T. Beck, B. Casu (eds): The Palgrave Handbook of European Banking, London,
2016
Abstract
This chapter explores European bank efficiency and performance. First, the authors provide an overview of the key estimation methods for efficiency and discuss selected applications to the European banking sector. Second, they apply stochastic frontier analysis to investigate the extent to which the reallocation of supervisory powers is associated with efficiency differences between European banks. In doing so, the discussion focuses particularly on whether direct supervision by the Single Supervisory Mechanism (SSM) as opposed to national competent authority (NCA) is related to cost and profit efficiency.
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Kommentar: Wen die Götter bestrafen wollen, dessen Gebete erhören sie
Reint E. Gropp
Wirtschaft im Wandel,
No. 4,
2016
Abstract
Die Europäische Zentralbank (EZB) hat in ihrer Ratssitzung am 8. September dieses Jahres entschieden, die Zinsen auf absehbare Zeit auf dem gegenwärtigen niedrigen Niveau zu halten, und hält sich offen, das Anleihekaufprogramm über den März 2017 hinaus zu verlängern. Sie kauft weiterhin monatlich Staatsanleihen und andere Wertpapiere im Wert von 80 Milliarden Euro, ist aber auch noch zu weiterem Handeln bereit – alles andere wäre auch ein falsches Signal gewesen. Eine Verlängerung des Ankaufprogramms nicht in Aussicht zu stellen – und damit implizit auch ein Ende der Niedrigzinsphase in Betracht zu ziehen –, dies hätten die Märkte als Signal zum Ausstieg aus der aktuellen Geldpolitik gedeutet. Das wiederum hätte sich umgehend auf Zinsen und Vermögenswerte ausgewirkt und wäre zum gegenwärtigen Zeitpunkt hochproblematisch. Denn noch immer liegt die Inflationsrate deutlich unter dem Zielwert der EZB von 2%.
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09.09.2016 • 37/2016
Comment: IWH President Reint E. Gropp: ECB resists its critics and maintains its asset purchase programme. Leaving the option for a further extension is completely reasonable.
Some observers, including recently a number of major banks, are criticising the European Central Bank (ECB) for maintaining its asset purchase program, currently scheduled to run until March of 2017 and leaving the option open to extend it further.
Reint E. Gropp
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