The Australian Prudential Regulation Authority (APRA) seeks to protect the financial sector from crises and shocks with new loss absorption requirements and proposed planning standards. APRA Vice Chairman John Lonsdale said crisis preparedness was at the very heart of APRA’s purpose as regulator of the financial services industry. “Although AustraliaRead More →

New Delhi: South Asia’s reliance on state-led development hides vulnerabilities to rising levels of unsustainable debt that could lead to financial crises, the World Bank has warned. Governments in the region, including India and Pakistan, are exposed to ‘hidden debt’ risk through funding guarantees by banks and state-owned companies, asRead More →

Summary Focus Financial crises wreak economic, social and political havoc. They impose significant fiscal costs, increase public debt and disrupt our societies. Designing and implementing policies that reduce the risks of a crisis occurring – as well as its costs – requires that the build-up of risks in the economyRead More →

Summary Focus Early warning indicators for financial crises are important elements for central bankers to guide macroprudential policies. One of these indicators – the deviation of the credit-to-GDP ratio from a long-term trend, in short, the credit-to-GDP spread – is very useful in this regard. Basel III therefore suggests thatRead More →

Focus Growth and productivity are consistently weak following financial crises. This article examines how financial crises affect innovation. Patents are an important measure of the type of innovative activity that can lead to productivity gains. We study patent data from a large sample of countries and financial crises and examineRead More →

We learned this month that the US Federal Reserve decided not to raise the countercyclical capital buffer required of banks above its current level of zero, even as the US economy is at a cyclical peak. It also removed “qualitative” ratings from its stress tests for US banks, but notRead More →

ABSTRACT In OECD countries, over the period 1980-2017, countries with lower debt-to-GDP ratios responded to financial difficulties with much more expansionary fiscal policy and suffered much less severe consequences. Two lines of evidence suggest that the relationship between debt ratio and policy response is determined in part by sovereign marketRead More →

According to the United States Commission of Inquiry into the Financial Crisis, the main causes of the 2007-2009 financial crisis were failures in corporate governance and policies, including widespread failures in financial regulation and supervision, lack of transparency, poor government preparedness, and systemic failure of accountability. The Commission concluded thatRead More →

The 21st century has proven economically as tumultuous as the previous two centuries. This period saw multiple financial crises hit nations, regions and, in the case of the Great Recession, the entire global economy. All financial crises share certain characteristics, but each tells its own unique story with its ownRead More →