Great Graphic: Emerging Market Bond Issuance

Sovereigns and corporates are taking advantage of the still accommodative global monetary conditions to secure funding.  ThisGreat Graphic, tweeted by Emerging Equity, from IIF data shows emerging market economies bond issuance over the past year. It is remarkable that the bulk of the bond issuance over the past year from emerging markets comes from Asia.  We […]

French Banks Play Russian Roulette

In the fourth quarter of last year, with tensions rising between Russia and the West over Ukraine, U.S., German, UK, and Swedish banks aggressively dialed down their credit exposures in Russia.  But as the graphic above shows, French banks, which have by far the highest exposures to Russia, barely touched theirs.  At $50 billion, this […]

The Sanctions Against Russia Do Bite: But Are They Having Their Intended Impact?

Often, the problem with many policy actions employed to influence the economy is their unintended consequences. In the case of economic sanctions, it is not always easy to tell whether half a success is any better than a failure. On March 21, 2014, under the new sanctions regime, both Visa and MasterCard froze the card […]

Searching For Banking Regulation’s Godiva

The Federal Reserve is mulling a new set of tougher banking rules to boost the odds that the financial system will remain sufficiently liquid when the next crisis strikes. It’s a worthy goal, if only because one day another event will surely arrive. But all the usual caveats apply when it comes to engineering outcomes in economics, starting with […]

China’s Shadow Banking System

Chinese debt concerns are complicated by two structural issues – the rise in borrowing by local governments and the increase in the role of the shadow banking system. Both sectors are testament to Chinese entrepreneurial spirit, but also point to deep problems in China’s financial system. Local But National… Outside of security matters or foreign […]

Bank Profits—With A Little Help From The Fed!

Global stock prices have rallied significantly since 2009. Financial stocks have increased albeit off a low base, with US banks up by over 200%. But improvements in the fortune of banks may be misleading. To paraphrase George Bernard Shaw, financial markets have substituted the “obsolete fictitious for the contemporary real”. Central bank policies, especially low […]

Better Capital Controls, and Less Interest Rate Hikes, Are What EMs Need

Life is tough if you are a central banker in an emerging market country. Besides dealing with your own country’s macroeconomic conditions, you have to worry about external shocks to a much larger extent than your colleagues in industrialized nations. Further, often due to a history of poor macroeconomic management and hyperinflation, foreign investors still […]

Revisiting Banking Union in a Single Currency Area (Part 2)

The current banking union framework remains far from ideal if the currency union dimension is taken into account. While decisions so far have been focusing on the moral hazard of banks, these measures fail to solve an additional market failure in the Euro area caused by the moral hazard of governments competing on funding costs, […]

Repo Comes Under the Microscope

Introduction On 29 January 2014, the EU Commission published a legislative proposal for a regulation on reporting and transparency of securities financing transactions[1] (SFTs) and associated FAQ document. The EU Commission is concerned that efforts to reform the structure of EU banks (in the form of the Liikanen proposals – see this blog post for […]