Social Network Analysis

The author refutes the consensus explanation of the cause of the financial crisis of 2007 and provides an alternative view, drawing on his studies of the US banking crises of the late 1800s

Slapped by the Invisible Hand: The Panic of 2007 (a review)

Using several recently available global datasets, this Staff Discussion Note examines macroeconomic effects of financial inclusion. It finds significant benefits to economic growth from financial inclusion, but the benefits diminish as financial inclusion and depth become large. Broadening access to credit can compromise economic and bank stability in countries with weak bank supervision. Other forms of financial inclusion—such as access to and use of bank accounts, branches, and ATMs—do not hurt stability, and can be promoted extensively. The note finds that gaps in financial inclusion are associated with economic inequality, but the association appears relatively weak.

https://www.imf.org/-/media/Websites/IMF/imported-full-text-pdf/external/pubs/ft/sdn/2015/_sdn1517.ashx

Financial Inclusion; Can it Meet Multiple Macroeconomic Goals?

In supermarkets, food manufacturers fight – even pay – to get the best locations for their products: at eye level, or at the ends of aisles, where they better attract the attention of questing shoppers and therefore are more likely to be bought. In software, designers have long known that most users do not change default settings. This is most easily seen in disputes about whether default privacy settings should opt users in or out. In 2008, the popular book Nudge, written by Richard R. Thaler and Cass R. Sunstein, focused mainstream attention on the years of this type of research, and dubbed the design of systems to nudge people toward particular behaviours that benefit both them and society in general “choice architecture” and the designers who make these apparently tiny but vastly influential decisions “choice architects”.

Security by Design

Asset securitizations and bank stability: Evidence from different banking systems

Disentangling the impact of securitization on bank profitability

/pdf/margin-requirements-and-systemic-liquidity-risk-32f6tnr61r.pdf

Margin requirements and systemic liquidity risk

https://eprints.soton.ac.uk/470393/3/Accepted_Manuscript.pdf

Evaluating the role of simulation-based experiential learning in improving satisfaction of finance students

Chapter 1 finds that short-term risks to global financial stability have abated since April 2016, but that medium-term risks continue to build. Financial institutions in advanced economies face a number of cyclical and structural challenges and need to adapt to low growth and low interest rates, as well as to an evolving market and regulatory environment. Weak profitability could erode banks’ buffers over time and undermine their ability to support growth. A cyclical recovery will not resolve the problem of low profitability. More deep-rooted reforms and systemic management are needed, especially for European banks. The solvency of many life insurance companies and pension funds is threatened by a prolonged period of low interest rates. Corporate leverage in emerging market economies remains elevated in some countries, but the current favorable external environment presents an opportunity for overly indebted firms to restructure their balance sheets. The political climate is unsettled in many countries. A lack of income growth and a rise in inequality have opened the door for populist, inward-looking policies. These factors make it even harder to tackle legacy problems and further expose economies and markets to shocks. A potent and more balanced policy mix is needed to deliver a stronger path for growth and financial stability, and avoid slipping into a state of financial and economic stagnation.

Financial stability challenges in a low-growth, low-rate era

We develop a macroprudential stress test to assess the resilience of banking systems. The proposed approach integrates liquidity risk and solvency risk and provides a convenient method to estimate the change in both of them based on the evolution of financial distress within the banking system. We estimate this evolution of financial distress using a new measure of systemic distress that incorporates microprudential as well as macroprudential risks in the banking system network. The proposed stress test provides output metrics that capture idiosyncratic as well as systemic economic risks at the level of an individual bank and the banking system as a whole. The empirical application of the stress test framework to the U.S. banking system shows how it can be effectively used to identify the systemic vulnerability of individual banks and the resilience of the system as a whole to economic risks. It also shows how the proposed approach can be effective for monitoring and assessing systemic interdependencies among banks.

Mohamed Bakoush

Papers

Disentangling the impact of securitization on bank profitability

Margin requirements and systemic liquidity risk

Evaluating the role of simulation-based experiential learning in improving satisfaction of finance students

Financial stability challenges in a low-growth, low-rate era

An integrated macroprudential stress test of bank liquidity and solvency