Stablecoins: Policy, sovereignty and backstops
No jurisdiction can ignore stablecoins. They can be banned outright only in the most effectively authoritarian countries, or accommodated and even enc…
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39 posts in this category
The geopolitics of stablecoins
Stablecoins are private digital money pegged to a fiat currency, overwhelmingly the US dollar. Dollar stablecoins reinforce American monetary and poli…
Read moreFinancial stability and politics
Politics might be the single largest driver of financial crises, but impossible for the financial authorities to address — the fatal flaw in macroprud…
Read moreEverybody working in the financial system has an incentive to increase its complexity, including the regulators
The almost infinite complexity of the financial system is the main reason why it is so hard to keep it under control. And that complexity is due to ev…
Read moreTrump, humiliation and the future of reserve currencies
The US dollar has been the reserve currency for the past century, never seriously challenged. Is that now under threat with Trump?
Read moreHistory repeats: Plaza and the Trump tariffs
The America First thrust of the Trump tariffs caught many by surprise. But it shouldn't have. We have been there before — in (my) living memory.
Read moreThe McNamara fallacy and the financial Authorities
We missed the excessive build-up of risk before 2007 despite having all the numbers and models right in front of us. Now we have doubled down on model…
Read moreDemocracy works
Democracy works. The political turmoil in Britain has showed us how to get rid of incompetent and ideological leaders. It would not have been as smoot…
Read moreWhy does it always seem like the world is (almost) coming to an end?
Terrible events dominate the news. There was an endless stream of bad news when I was listening to Today on BBC4 this morning. But are things really …
Read moreResiliency or shock absorption?
The way the financial authorities address threats to financial stability is by resilience. But is that the right way? Might it be better to emphasise …
Read moreThe central banks' Catch-22
Inflation is exploding. The reason is the central banks doing what it takes to keep the economy going. Now they are damned if they do and damned if th…
Read moreCentral bank digital currencies
Central-bank digital currencies will make the financial system more efficient. But will they make it safer? Maybe, but they could easily end up increa…
Read moreWhat to do about the Covid financial system bailouts?
Financial crises and bailouts of financial institutions are inevitable and can't be prevented without paying too high a price. Diversity is the best w…
Read moreThe libertarian response to the Covid-19 financial turmoil
A libertarian sees the Covid-19 bailout of the financial system as a predictable failure of regulations. Much better to have a laissez-faire economy a…
Read moreThe socialist response to the Covid-19 financial turmoil
The state just saved the financial system from itself. What is the point of privately owned banks if they need to be bailed out every decade?
Read moreOn the response of the financial authorities to Covid-19
The financial authorities have just bailed the financial system out for the second time in a decade. While the authorities are proud of having prevent…
Read moreThe Covid-19 bailouts and the future of the capitalist banking system
The central banks bailed out the financial system in March 2020, the second time they have done so in 12 years. What is the point of privately owned b…
Read moreThe dissonance of the short and long term
The type of risk we most care about is long-term, what happens over years or decades, but we tend to manage that risk over short periods. This column …
Read moreThe hierarchy of financial policies
On top is the authority in charge of fiscal policy, followed by those running monetary, microprudential, and finally macroprudential policies. This ra…
Read moreEuropean bank-sovereign doom loop
European banks and sovereigns are much more closely linked than American banks and their government. The resulting bank-sovereign doom loop has been g…
Read moreWhy macropru can end up being procyclical
Discretionary macroprudential policies aim to be countercyclical by adjusting risk-taking across the financial cycle. This column argues that the oppo…
Read moreThe fatal flaw in macropru: It ignores political risk
Political risk is a major cause of systemic financial risk. This column argues that both the integrity and the legitimacy of macroprudential policy, o…
Read moreEverybody right, everybody wrong: Plural rationalities in macroprudential regulation
Macroprudential policy has become increasingly popular in the aftermath of the Global Crisis, but it remains controversial. This column argues that vi…
Read moreModels and regulations and the political leadership
Why do the regulatory authorities seemingly fall into the category of model believers, if not quite to the view that there must be one true model?…
Read moreThe macro-micro conflict
There has always been conflict between macro- and microeconomic regulation. Microeconomic policy reigns supreme during good times, and macro during ba…
Read moreAre asset managers systemically important?
Some financial authorities have proposed designating asset managers as systemically important financial institutions (SIFIs). This column argues that …
Read moreRisky business: Finding the balance between financial stability and risk
It is important that we understand and do something about systemic risk. The problem is that we desire two incompatible things simultaneously: we wish…
Read moreEurope's proposed capital markets union
The proposed EU capital markets union aims to revitalise Europe's economy by creating efficient funding channels between providers of loanable funds a…
Read moreOn the Swiss FX shock
Just looked again at the what I did on the January 2015 Swiss FX shock, looking at how the various risk measures performed in the days after the even…
Read moreThe new market-risk regulations
Basel III is coming into focus. The fundamental logic of the regulatory changes seems sensible, but the devil is in the detail - empirical implementa…
Read moreSolvency II: Three principles to respect
Europe is set to finally approve new insurance regulation, Solvency II. This column argues that the final text should respect three fundamental princi…
Read morePolitical challenges of the macroprudential agenda
Central banks frequently lead the macroprudential policy implementation. The hope is that their credibility in conquering inflation might rub off on m…
Read moreTowards a more procyclical financial system
Is the fact that different banks have different risk models problematic? Contrary to the Basel Committee and the European Banking Authority, this colu…
Read moreCountercyclical regulation in Solvency II: Merits and flaws
October 2011 saw the latest draft of Solvency II, the European Union's code for regulation of the insurance industry. This column argues that the late…
Read moreCapital, politics and bank weaknesses
A debate is raging on capital adequacy requirements for banks. The UK wants to be allowed to be on ÛÏtop upÛ the agreed levels, i.e. to impose stri…
Read moreA prudential regulatory issue at the heart of Solvency II
A delicate regulatory question is under consideration on the capital (reserve) requirements at the heart of Solvency II (the insurance industry equiva…
Read moreValuing insurers' liabilities during crises: What EU policymakers should not do
In crises, insurance companies' asset values may fall significantly without a corresponding drop in their liabilities. European insurers have argued t…
Read moreBonus incensed
Bank bonuses have been blamed for contributing to the crisis, and regulators and politicians are now demanding changes in compensation arrangements. M…
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