Interaction of capital and liquidity regulation in the banking sector

Basel III responded to the financial crisis among other by redefining and expanding the capital requirements and by introduction of the liquidity requirements in the banking sector. Since banks' liquidity and capital positions influence each other through assets structure channel, asset quality channel and profitability channel, there exists a significant relationship among capital and liquidity regulatory tools. A bank can improve its capital and liquidity ratios by lowering risk-weighted assets (assets structure channel), but with the negative impact on the interest profit (profitability channel). We therefore aim to test the functionality of these two channels in relation to capital and liquidity positions in the Czech banking sector. We document the effect of the assets structure channel in case of liquidity and capital positions and effect of the profitability channel for the large banks. However, low profitability and introduction of a leverage ratio can limit the effect of assets structure channel on banks' capital positions.Web of Science65554552

Flagship Report on Macro-Prudential Policy in the Banking Sector

European System of Financial Supervisio

Urban civic pride and the new localism

Civic pride relates to how places promote and defend local identity and autonomy. It is often championed as a key value and aspiration of local government. This paper argues that civic pride has been under‐examined in geography, and in particular the emotional meanings of pride need to be better understood. In response, I present an emotional analysis of civic pride and discuss its role in British cities, particularly in the context of urban regeneration and the UK's new localism agenda. In the latter part of the paper I provide a case study of Nottingham in England, where I employ a discourse analysis of recent urban policy and local media to examine how civic pride is being mobilised and contested in the city. Examining civic pride is important because it shapes and reflects the political values that local governments stand for and provides a basis for thinking about how emotions are used strategically (and problematically) in urban policy. This paper complements and challenges existing literature on cities by showing how civic pride shapes, but also obscures, the ideological politics of local government and how, as geographers, we might consider more seriously the ways forms of power, identity and inequality are reproduced and contested through emotions such as pride

'Total Assets' Versus 'Risk Weighted Assets': Does it Matter for MREL Requirements?

The paper discusses the role of risk weighting in the determination of minimum requirements for eligible bail-in-able liabilities of banks (MREL), i.e. liabilities that are not exempt from the bail-in tool in bank resolution and that can be written down or converted into equity if losses on assets exceed the available equity and such bailing-in is required to re-establish bank solvency so as to provide a basis for maintaining systemically important operations in resolution. The paper begins with a general discussion of the reasons for introducing bank resolution as a special procedure outside of insolvency law, of the reasons for having the bail-in tool and of the frictions that may stand in the way of successful and frictionless resolution. This discussion emphasizes the importance of having sufficient bail-in-able liabilities available; in contrast, for large institutions that have access to bond markets, the social costs of such requirements are small (unlike the private costs to the banks themselves). However, neither risk weighted nor total assets provide proper guidance for determining MREL. Risk-weighting suffers from a lack of a proper statistical basis and a certain manipulability. Moreover, the risk weighting that is used for capital regulation is not well suited for determining MREL; whereas capital regulation focuses on the probability of bad results, MREL is concerned with the extent of losses conditional on results being bad. “Total assets” suffer from not truly representing total assets because various rules, e.g. for netting, allow banks to keep certain assets and liabilities off their balance sheets

Low‐carbon transition risks for finance

The transition to a low‐carbon economy will entail a large‐scale structural change. Some industries will have to expand their relative economic weight, while other industries, especially those directly linked to fossil fuel production and consumption, will have to decline. Such a systemic shift may have major repercussions on the stability of financial systems, via abrupt asset revaluations, defaults on debt, and the creation of bubbles in rising industries. Studies on previous industrial transitions have shed light on the financial transition risks originating from rapidly rising “sunrise” industries. In contrast, a similar conceptual understanding of risks from declining “sunset” industries is currently lacking. We substantiate this claim with a critical review of the conceptual and historical literature, which also shows that most literature either examines structural change in the real economy, or risks to financial stability, but rarely both together. We contribute to filling this research gap by developing a consistent theoretical framework of the drivers, transmission channels, and impacts of the phase‐out of carbon‐intensive industries on the financial system and on the feedback from the financial system into the rest of the economy. We also review the state of play of policy aiming to protect the financial system from transition risks and spell out research implications

Regulation:Managing the Antinomies of Economic Vice and Virtue

In the quarter-century that SLS has been published, regulation has emerged as a new, and for many exciting, inter-disciplinary field. The concept itself requires a wider view of normativity than the narrow positivist one of law as command. It is certainly protean, ranging over many fundamental questions about the changing nature of the public sphere of politics and the state, and its interactions with the ‘private’ sphere of economic activity and social relations, as well as the mediation of these interactions, especially through law. This survey aims to outline and evaluate some of the main contours of the field as it has developed in this recent period, focusing on the regulation of economic activity. Regulation is seen as having emerged with the withdrawal by governments from direct provision of many economic and social services, to be replaced by corporatist bureaucracies and quasi-public agencies managing the complex public-private interactions of financialised capitalism. The arguments for ‘smart’ regulation have, in an era fixated on neo-liberalism, generally legitimised delegation of responsibility to big business. Its advocates, having been drawn into policy fields, have perhaps too often lost their critical edge, and allowed it to become instrumentalised, reflecting the technicist character of its practice