Financial Markets

Other Report

Reforming Capital Requirements for Financial Institutions

Author: Squam Lake Working Group on Financial Regulation

This Working Paper, the second in a series from the Squam Lake Working Group distributed by the Center for Geoeconomic Studies, argues that regulators consider systemic effects when setting bank capital requirements. Everything else the same, capital requirements should be proportionately higher for larger banks, banks that hold more illiquid assets, and banks that finance more of their operations with short-term debt. But capital requirements are not free. When designing capital requirements that address systemic concerns, regulators must weigh the costs such requirements impose on banks during good times against the benefit of having more capital in the financial system when a crisis strikes.

See more in Global; Financial Markets; Financial Regulation

Other Report

A New Information Infrastructure for Financial Markets

Author: Squam Lake Working Group on Financial Regulation

Information about prices and quantities of assets lies at the heart of well-functioning capital markets. In the current financial crisis, it has become clear that many important actors—both firms and regulatory agencies—have not had sufficient information. Distributed by the Center for Geoeconomic Studies, this Working Paper proposes a new regulatory regime for gathering and disseminating financial market information. The authors argue that government regulators need a new infrastructure to collect and analyze adequate information from large (systemically important) financial institutions. This new information framework would bolster the government's ability to foresee, contain, and, ideally, prevent disruptions to the overall financial services industry.

See more in United States; Financial Markets; Digital Infrastructure

Audio

McKinsey Executive Roundtable Series in International Economics: Beyond Firefighting: Rethinking Financial Market Regulation (Audio)

Speakers: William H. Donaldson, Stephen Friedman, and Ernest Patrikis
Presider: John Gapper

Listen to experts including former Securities and Exchange Commission Chairman William Donaldson discuss what implications the 2008 financial crisis is likely to have for securities regulation.

See more in Global; Financial Markets; Financial Regulation

Op-Ed

What I am worried about

Author: Roger M. Kubarych
Nikkei

In this Nikkei article, Roger Kubarych says that the major threat facing the global economy and financial markets is an enormous decrease in the capacity for risk taking.

See more in Financial Markets; Global

Analysis Brief

Bears in Moscow

Author: Lee Hudson Teslik

The global financial crisis has taken a particularly harsh toll on Russia, where the leading stock index has lost more than half its value since July. Moscow has devised a bailout package, but analysts say more pain could be on the way, particularly if oil prices keep falling.

See more in Russian Federation; Financial Markets

Op-Ed

Nationalization: A Solution for Housing

Author: Sebastian Mallaby
Washington Post

Nationalizing Fannie Mae and Freddie Mac, the two monster housing-finance companies, may be risky, but it is healthier than other options.  In this Washington Post op-ed, Sebastian Mallaby argues that the US government should nationalize and then dismantle these institutions, creating maximum space in the mortgage market for smaller private players.

See more in United States; Financial Crises; Financial Markets