The consequences of increased financial collateralization
There has been a strong upward trend in collateralization since the great financial crisis. Suitable collateral, such as government bonds, is essential for financial...
How bank regulatory reform has changed macro trading
The great regulatory reform in global banking has altered the backdrop for macro trading. First, greater complexity and policymaker discretion means that investment managers...
Cash hoarding and market dynamics
Institutional asset managers can aggravate market swings due to the pro-cyclicality of redemptions, internal leverage and cash positions. A new empirical analysis shows that...
Volcker Rule and liquidity risk
The Volcker Rule has banned proprietary trading of banks with access to official backstops. Also, market making has become more onerous as restrictions and...
The macroeconomic impact of Basel III
The regulatory capital reform for banks increases capital costs and credit spreads charged on clients. However, it also clearly reduces the tail risk of...
The global debt overhang
A new IMF report illustrates that a large share of both advanced and emerging economies struggle with private debt overhangs. Excessive debt is a...
The threat from China’s shadow finance
In past years China witnessed a boom in shadow finance, particularly in form of entrusted loans. Banks apparently used shadow credit products in large...
The side-effects of non-conventional monetary policy
A BIS summary of research gives a nice overview on non-conventional monetary policies and their unintended systemic consequences. Current policies appear to yield diminishing returns in terms...
Climate change and systemic financial risk
The rise in global temperatures calls for a lower-carbon economy overtime. This poses systemic financial risk in two ways. First, large fossil-fuel reserves may...
The China credit risk
The rapid rise of China’s internal debt stock is a global concern. Oxford Economics research shows that non-financial sector debt has soared to 250%...
RECENT ARTICLES
Understanding collateral runs
In normal financial runs lenders want their money back. In collateral runs borrowers want their collateral back. In today’s highly collateralized financial system the...
How to prepare for the next systemic crisis
Systemic crises are rare. But they are make-or-break events for long-term performance and social relevance of investment managers. In systemic crises conventional investment strategies...
The passive investment boom and its consequences
Passive investment vehicles have been expanding rapidly over the past 10 years, with assets reaching about USD8 trillion or 20% of aggregate investment funds...