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Journal Cover OECD Journal : Financial Market Trends
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   Full-text available via subscription Subscription journal
   ISSN (Print) 1995-2864 - ISSN (Online) 1995-2872
   Published by OECD Homepage  [80 journals]
  • Evaluating capital flow management measures used as macro-prudential tools
    • Abstract: Earlier OECD research has shown that capital flow management measures (CFMs) that are used as macro-prudential measures (MPMs), including currency-based restrictions applied to banks’ operations also with non-residents, have the intended negative impact on capital account openness as measured by covered interest parity indicators. But what is their impact as macro-prudential tools to improve resilience to financial stability risks?
      This paper refers to the Bruno and Shin (2013) study that suggests that currency-based restrictions act as an effective macro-prudential buffer by reducing the sensitivity in emerging economies of cross-border bank lending to global credit cycles as measured by the volatility index VIX. The specific restrictions considered by the Bruno and Shin study are defined as CFMs and MPMs by both the IMF and the OECD. The paper shows that this result is mitigated when using updated data and testing the same hypotheses for more countries. Therefore further research is needed before concluding on the effectiveness of CFMs used as MPMs. On the other hand, the paper does find that CFMs, including currency-based measures, play a role in managing the domestic credit implications of those central banks engaged in foreign exchange interventions.
      The paper suggests that countries concerned with financial stability risks that may arise from global credit push factors, while wishing to avoid price distortions caused by CFMs, could use Basel III-consistent liquidity coverage ratios and net stable funding ratios as alternatives to CFMs; they also have the advantage of not having raised objections between governments so far regarding international commitments to exchange rate flexibility and cross-border openness, including the OECD Code of Liberalisation of Capital Movements.
      PubDate: 2016-04-25T00:00:00Z
       
  • Financial risks in the low-growth, low-interest rate environment
    • Abstract: The current post-crisis economic and financial landscape has been characterised by rising asset prices – driven by record low interest rates and easy monetary policy – and low productive investment by firms in advanced countries. The OECD Business and Finance Outlook 2015 examines this situation and looks at the way in which companies, banks, institutional investors and shadow banking entities are operating in the low-growth and low-interest rate environment and explores the build-up of risks in the financial system. The "promises" of growth, employment, and adequate retirement income are seen to be at risk in the absence of policy actions. These issues were also discussed at a launch event of that publication, a summary of which is presented in this article. JEL classification: E2, E4, E5, F21, F23, G1, G2.
      Keywords: financial system, financial crisis, asset prices, financial institutions, institutional investors, shadow banking, pension systems, retirement income, financial education.
      PubDate: 2016-04-25T00:00:00Z
       
  • Reducing and sharing the burden of bank failures
    • Abstract: This report demonstrates that the contingent liabilities associated with efforts to limit the adverse externalities stemming from failures in the European banking sector are substantially decreasing as a result of new regulation. Noting that the implied shifting of losses from taxpayers to bank creditors is desirable, the report recognises that losses do not disappear. It discusses the issue of where bank recovery or resolution bail-in losses may go. It underlines that the sectoral allocation of losses matters, but concludes that our understanding needs to be further developed and that more transparency about the structure of bank creditors would be desirable. Increasing transparency in this regard would, among other things, help assure policy makers that the new tools available can be used effectively and smoothly in actual practice. Also, raising awareness of investors in bail-inable bank debt about the associated risks should enhance the credibility of the bail-in framework.
      PubDate: 2016-04-25T00:00:00Z
       
  • Opportunities and limitations of public equity markets for SMEs
    • Abstract: This article on public equity financing for small and medium-sized enterprises (SMEs) complements earlier OECD work on market-based finance for SMEs. The development of this market segment could promote investment in SMEs and, together with securitisation and other non-bank debt financing instruments, encourage an enhanced allocation of risk and risk taking, and thus support growth. Despite the benefits of public SME equity, its share is small and an equity gap exists for risk financing more generally. A number of important impediments to the wider use of public equities for SMEs are identified, such as admission cost and listing requirements, lack of liquidity, educational gaps, limited ecosystems, and tax treatment, all of which require attention by regulators and policy makers alike.
      PubDate: 2016-02-03T00:00:00Z
       
  • Finance and climate
    • Abstract: Climate change is a major political and economic challenge. This paper sketches out its relevance for the financial sector. Necessary low-carbon investments imply a significant yet manageable financing gap. However, we argue that beyond capital mobilisation that has attracted most attention until now, the main challenge is ensuring a transition-consistent capital reallocation. The financial sector has a key role to play in that respect, complementary to appropriately designed climate policies. To help the financial system fulfil its role, the understanding of the economics of climate change should be deepened and a sector-wide businessoriented appropriation of these issues should be promoted. JEL classification: Q54, E10, E44, G12, G14, G21, G22, G23, G28.
      Keywords: Climate change, low carbon, climate finance, green finance, investment, capital allocation, financial system, risks
      PubDate: 2016-02-03T00:00:00Z
       
  • Financial instruments for managing disaster risks related to climate
           change
    • Abstract: This article provides an overview of the potential implications of climate change for the financial management of disaster risks. It outlines the contribution of insurance to reducing the economic disruption of disaster events and policy approaches to supporting the penetration of disaster insurance coverage and the capacity of insurance markets to absorb disaster risks, including through the use of capital markets instruments and international co-operation in risk pooling. It concludes with a number of recommendations for improving the financial management of disaster risks in the context of climate change and some areas of further work. JEL classification: G22, G23, H84, Q54
      Keywords: Climate change, natural disasters, extreme events, insurance, reinsurance, catastrophe bonds
      PubDate: 2016-02-03T00:00:00Z
       
 
 
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