Posted on October 16, 2014 by iMFdirect
By Luis Brandão-Marques, Gaston Gelos, and Erik Oppers
The global financial crisis reminded us that banks often take risks that are excessive from society’s point of view and can damage the economy. In part, this is the result of the incentives embedded in compensation practices and of inadequate monitoring by stakeholders. Our analysis found the right policies could reduce banks risky behavior.
In our latest Global Financial Stability Report we take stock of recent developments in executive pay, corporate governance, and bank risk taking, and conduct a novel empirical analysis.
Filed under: Advanced Economies, Annual Meetings, Economic outlook, Economic research, Finance, Financial regulation, Fiscal policy, IMF, International Monetary Fund, Investment, Reform | Tagged: bank capital, banking sector, banks, financial system, Global Financial Stability Report, investment, policymakers, risk management, shareholders, United States | Leave a comment »
Posted on January 7, 2010 by iMFdirect
By John Lipsky
There is a broad consensus on at least one conclusion from the turmoil of the past few years: Fundamental changes are needed in the global financial sector.
Some of these changes seem relatively clear:
- Risk management of many financial firms needs strengthening
- Compensation schemes need to be re-evaluated
- Capital standards need to be bolstered
- Regulation needs fundamental reform
- Supervision needs to be improved
- And financial institutions’ balance sheets need to be freed of the burden of impaired assets.
Nonetheless, important tradeoffs will have to be addressed—and political hurdles surmounted—before significant progress can be achieved.
Filed under: Economic Crisis, Financial Crisis, Financial regulation, Global Governance, International Monetary Fund | Tagged: capital buffers, capital standards, financial sector reform, financial supervision, financial transactions tax, impaired assets, John Lipsky, regulatory reform, risk management, Tobin tax | 15 Comments »
Posted on December 1, 2009 by iMFdirect
By José Viñals
Some countries with similar financial and regulatory systems fared differently during this crisis. What are the reasons for this? And what made some financial institutions with similar business models, and in the same country, better equipped to deal with the virulence of the crisis? To find the answers, we need to ask the following question: How well did the four key components of a sound financial system―good regulation, effective supervision, robust risk management, and credible resolution mechanisms―perform?
A lot of attention has been paid to improving regulation, the first key component. Sweeping changes are being proposed through new and enhanced rules of the game, such as higher capital, loan loss provisions, liquidity buffers, and limits on executive compensation. I believe that corresponding changes are also needed in the other three components if a crisis of this magnitude is to be avoided in the future.
Filed under: Economic Crisis, Financial regulation | Tagged: Financial regulation, financial sector supervision, resolution regime, risk management, systemic risk | 1 Comment »