George G. Kaufman, PhD

John F. Smith Professor of Finance and Economics, School of Business

Cross Border Banking: Regulatory Challenges

World Scientific: 2006
(ISBN 981-256-829-8)

Synopsis
Cross-border banking, while having the potential for a more efficient financial sector, also creates potential challenges for bank supervisors and regulators. It requires cooperation by regulatory authorities across jurisdictions and a clear delineation of authority and responsibility. That delineation is typically not present and regulatory authorities often have significant different incentives to respond when cross-border-active banks encounter difficulties. Most of these issues have only begun to be seriously evaluated.

This volume, one of the first attempts to address these issues, brings together experts and regulators from different countries. The wide range of topics discussed include: the current landscape of cross-border bank activity, the resulting competitive implications, emerging challenges for prudential regulation, safety net concerns, failure resolution issues, and the potential future evolution of international banking.

Systemic Financial Crises: Resolving Large Bank Insolvencies

World Scientific, 2005
(ISBN 981-256-348-2)

Synopsis
Bank failures, like illness and taxes, are almost a certainty at some time in the future. What is less certain is their cost to and adverse implications for macroeconomies. Past failures have frequently been resolved at very high cost to society. However, the cost could be reduced through having a well-developed, credible and widely publicized plan ready to put into action by policymakers. If no such plan is ready when a large bank approaches insolvency, political pressures are likely to influence the response of regulators.

Minimizing immediate, short-run costs are likely to outweigh minimizing further out, longer-run and longer-lasting costs, even if these delayed costs promise to be substantially greater. Stated differently, today will win out over tomorrow and politics will trump economics. How best to prevent such unfavorable outcomes is the major theme of this volume. The articles presented review past insolvency resolutions, draw lessons from these resolutions, discuss impediments to efficient resolutions including cross country, cross-regulator, and institutional challenges and recommend how to move forward.

Market Discipline: The Evidence Across Countries and Industries 

MIT Press, 2004
(ISBN 0-262-02575-2)

Synopsis
The effectiveness of market discipline- the strong built-in incentives that encourage banks and financial systems to operate soundly and efficiently-commands much attention today, particularly in light of recent accounting scandals. As government regulation seems to grow less effective as the banking industry and financial markets grow more complex, the role of market discipline becomes increasingly important. In this collection, which grew out of a conference cosponsored by the Federal Reserve Bank of Chicago and the Bank for International Settlements in Basel, Switzerland, a diverse group of academics and policymakers address different aspects of the ability of market discipline to affect corporate behavior and performance to regulate financial markets.

 

 

Market Discipline in Banking: Theory and Evidence

 

JAI Elsevier Science, 2003
(ISBN 0-7623-1080-4)

Synopsis
It has become increasingly evident in recent years that the safe and the efficient operation of the banking system cannot be guaranteed by Government regulation and supervisory review alone, regardless of how conscience the regulator or well-intended the regulations. Government regulation needs to be supplemented by market discipline. Market discipline requires the existence of at least some de-facto at-risk bank stakeholders, who have an incentive both to monitor the financial performance of the banks and to take action to influence bank management if they find performance satisfactory. But the concept of market discipline in banking was dormant for many years in the post-World War II era in almost all countries as the fear of major economic spillover damage from bank failures led governments and regulators to either not failing insolvent banks officially or protecting most or all stakeholders, if they did not place these banks in receivership. Only recently has the concept of market discipline been resurrected in banking. The 12 papers in this volume and eight commentaries on the papers discuss whether the resurrection is worthwhile. They consider the basic role of market discipline, how it may be applied to banking and more broadly to large financial institutions of any type, and the evidence of how well it has worked to date and the promise it may have for the future. The authors and discussants represent a wide array of both countries and affiliations academic and regulatory. Thus, the papers reflect a wide spectrum of experience and thought.

Asset Price Bubbles: Implications for Monetary and Regulatory Policies

JAI Elsevier Science, 2001
(ISBN 0-7623-0845-1)

Synopsis
The papers in this volume were presented at special sessions at the annual meetings of the Western Economic Association in San Francisco in July 2001 and of the European Financial Management Association in Lugano, Switzerland in June 2001. The comments by the discussants at two of the San Francisco sessions are also included in this volume. 

Asset price bubbles have been and continue to be an area of major public policy concern in many countries. But while we know that the bursting of such bubbles is exceedingly painful and destructive to the economy, little is known of their causes. Indeed, there is little agreement even on the definition of a bubble and whether, whatever it is, is economically rational or irrational and reflect temporary excessive exuberance. Can bubbles be identified ex-ante before they burst? Often, one person perceived bubble is another perceived equilibrium price path. How and when is a bubble recognized? Should asset prices be a concern for monetary or fiscal policy-makers and, if so, how and when should policy-makers act? Should monetary policy attempt to target and stabilize asset prices the same as product prices? Should monetary policy act quickly at the beginning of the bubble or wait until the perceived bubble has been underway for some time? For how long? Will bubble restraining policies burst a bubble? Would it have burst on its own? How can the damage done after bubbles burst be minimized? Does the experience the U.S. in the 1920s and of Japan in the 1990s provide any lessons and guidelines for these and other countries in the 2000s? 

The papers in this volume examine these and other aspects of asset price bubbles from the perspective of different times and different countries. The authors are experts who represent different countries, different economic philosophies, and different backgrounds academic, government, bank regulatory agency and private. As a result, the papers add greatly to our storehouse of knowledge about asset price bubbles and hopefully will contribute to more successful public and private policies for restraining both the bubbles and their consequences and improving economic welfare.

Global Financial Crises: Lessons from Recent Events

Kluwer Academic Publishers, 2000
(ISBN 0-7923-7865-2)

Synopsis
Since 1990, major banking and currency crises have occurred in many countries throughout the world – including Mexico and Latin America in 1994-95, East Asia in 1997-98, and Russia and Brazil in 1998-with large costs both to the individual countries experiencing the crises and to other nations. As a result, considerable effort has been expended by economists and policymakers to identify the causes of theses crises and to design programs with the aim of both preventing similar crises from occurring in the future, and of minimizing the costs when these do occur. These studies have cut across national boundaries, being undertaken by individual researchers and organizations in particular countries as well as by international institutions. 

This book collets the papers and discuss comments presented at a conference co-sponsored by the Federal Reserve Bank of Chicago and the Bank for International Settlements in Basel, Switzerland, and held in Chicago in early October 1999. The purpose of the conference was to identify and discuss the lessons to be learned from these crises. Topics discussed included reviews of the crises in the individual countries and regions; analyses of the policy responses, both by the affected countries and by official international institutions; what has been learned from these crises; deposit insurance reform; the design of bank capital regulation; the role of bank supervision and regulation; and the future of official international financial institutions, such as the International Monetary Fund and the World Bank. The conference participants included a broad range of academic, industry, and regulatory experts from more than twenty-five countries 

Because of the timeliness of the conference and the wide-ranging expertise of the participants, the papers in this book should be of significant interest both to students of financial crises and to domestic and international policymakers.

 

Bank Fragility and Regulation: Evidence From Different Countries

JAI Elsevier Science, 2000
(ISBN 0-7623-0698-X)

Synopsis
The papers in this volume were presented at three invited sessions at the annual meeting of the Western Finance Association in Vancouver, Canada on July 2, 2000. The comments by the discussants were also presented at these sessions and are included in the volume. As did many of the past volumes in this series, this volume focuses on current problems in banking that have the potential not for only disrupting the smooth provision of banking and other financial services, but also for adversely affecting domestic and even international macroeconomic activity. Because serious banking problems have been experienced by most countries in recent years, the papers both focus on fragility and regulation in different countries and are authored by leading financial economists in six different countries, including Belgium, Germany, Italy, the Netherlands, the United Kingdom, and the United States. By providing an international perspective, the papers provide insights into the commonality of banking problems in different countries and the role of regulation both in attempting to prevent and in potentially, albeit unintentionally, encouraging banking crises. As such, the papers add to our storehouse of knowledge on the causes, symptoms, and consequences of banking problems across countries.