Are central banks suited for the role of a regulator?

The current consensus for a regulatory blueprint after today’s financial crisis is calling for increased macro-prudential supervision of financial markets. The proposals of Europe’s de Larosière working group are no exception. What is another characteristic of the discussion is that both the Fed and the ECB are quick to proclaim that they should play a “leading” role in the macro-prudential supervision. I.e. they want to have that responsibility rather than just a mere say in the process (central role) as they are conceded in the de Larosière proposals. What makes this an interesting topic is the fact that central banks over the last decade had to part from a lot of supervisory responsibilities, so they are now lobbying to get these back.

Employee-buy-out: worthy but fraught with difficulty

Who said that the credit crunch did not create some innovative ideas apart from government bailouts for a variety of industries. It is fairly obvious that the car industry in general and GM in particular are in difficulties. And so are GM’s European subsidiaries. The German one is called Opel. For some time now German […]

Relaxation of Maastricht – not a good idea

As the financial crisis drags on, one of the big winners has certainly been euro membership. Being offered shelter from the storm of volatile exchange rates has lead to a surprising line of countries that would like to fast track EMU membership.   But while the potential short-term benefits for the applicants are clear (foremost […]

Just do it, Jean-Claude!

During the January ECB press conference, its president made some interesting reference to the liquidity trap which the ECB was not willing to risk going into. Important in this respect is, of course, how a liquidity trap would be defined for a central bank to be in a position to actively decide to either jump […]

Still too much wishful thinking on banks

Thinking on banks is still severely inconsistent in the public domain. Consider those three demands: 1.Continue lending at low rates in order to keep the economy going. 2.Increase the asset quality on the balance sheet. 3.Improve the risk absorbing equity. Actually, at best only the last two of those three demands are not mutually exclusive. […]

ECB puts a significant bypass in place

As of today the ECB puts in place a significant change in the standing facilities corridor (see press release here). The band between the marginal lending facility (normally +100 bp above the minimum bid rate) and the deposit facility (normally 100 bp below the minimum bid rate) is narrowed from 200 to just 100 bp. […]

EMU approaching stall speed

Remember the stall speed phrase from the 2007 discussion on the US economy? “Stall speed” is a term borrowed from both cycling and aviation meaning that once an object becomes to slow, it will uncontrollably fall.   Stall speed is an important feature of the business cycle, too. Quite naturally, it is every central banker’s […]