Economic Policy Commons^™

Lessons Learned: Edwin (Ted) Truman, Yasemin Sim Esmen

Journal of Financial Crises

Insights on fighting financial crises from Ted Truman, an expert in responding to the international dimensions of financial crises. Topics include the initial US response to the Global Financial Crisis of 2008-2009 and the utiltiy of issuing Special Drawing Rights (SDR).

Basel Iii G: Shadow Banking And Project Finance, Christian M. Mcnamara, Andrew Metrick

Journal of Financial Crises

The Net Stable Funding Ratio (NSFR), a liquidity standard introduced by Basel III, seeks to promote a better match between the liquidity of a bank’s assets and the manner in which the bank funds those assets. The NSFR requires banks to maintain a minimum amount of funding deemed “stable” by the Basel framework based on the liquidity of the banks’ assets and activities over a one-year timeframe. One of the areas seen as most affected by this development may be bank participation in project finance for infrastructure development. Since the global demand for infrastructure development remains robust, the shadow banking …

Basel Iii F: Callable Commercial Paper, Christian M. Mcnamara, Rosalind Bennett, Andrew Metrick

Journal of Financial Crises

One of the Basel Committee on Banking Supervision’s responses to the global financial crisis of 2007-09 was to introduce the Liquidity Coverage Ratio (LCR), a short-term measure that evaluates whether a bank has enough liquidity to meet expected cash outflows during a 30-day stress scenario. One area in which this incentive has already resulted in changed practices is in the market for commercial paper. Banks often provide backup liquidity facilities to the issuers of commercial paper that the issuers can draw upon to repay a maturing issue of commercial paper if they are unable to sell a new issue to …

Basel Iii D: Swiss Finish To Basel Iii, Christian M. Mcnamara, Natalia Tente, Andrew Metrick

Journal of Financial Crises

After the Basel Committee on Banking Supervision (BCBS) introduced the Basel III framework in 2010, individual countries confronted the question of how best to implement the framework given their unique circumstances. Switzerland, with a banking industry that is both heavily concentrated and very large relative to the size of its overall economy, faced a special challenge. It ultimately adopted what is sometimes referred to as the “Swiss Finish” to Basel III—enhanced requirements applicable to Switzerland’s “too-big-to-fail” banks Credit Suisse and UBS that go beyond the base requirements established by the BCBS. Yet the prominent role played by relatively new contingent …

Basel Iii B: Basel Iii Overview, Christian M. Mcnamara, Michael Wedow, Andrew Metrick

Journal of Financial Crises

In the wake of the financial crisis of 2007-09, the Basel Committee on Banking Supervision (BCBS) faced the critical task of diagnosing what went wrong and then updating regulatory standards aimed at preventing it from occurring again. In seeking to strengthen the microprudential regulation associated with the earlier Basel Accords while also adding a macroprudential overlay, Basel III consists of proposals in three main areas intended to address 1) capital reform, 2) liquidity standards, and 3) systemic risk and interconnectedness. This case considers the causes of the 2007-09 financial crisis and what they suggest about weaknesses in the Basel regime …

European Central Bank Tools And Policy Actions B: Asset Purchase Programs, Chase P. Ross, Rosalind Z. Wiggins, Andrew Metrick

Journal of Financial Crises

Beginning in August 2007, the European Central Bank (ECB) used standard and non-standard monetary policies as the global financial markets progressed from initial turmoil to a widespread sovereign debt crisis. This case describes the key features of the ECB’s asset purchase programs throughout the Global Financial Crisis and subsequent European sovereign debt crisis. These programs include the Covered Bond Purchase Programs (CBPP1, CBPP2, CBPP3), Securities Markets Program (SMP), Outright Monetary Transactions (OMT), Asset-backed Securities Purchase Program (ABSPP) and the Public Sector Purchase Program (PSPP).

In combating the crises, the ECB designed various innovative programs which it successively employed as the …