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February 2016

Leveraging urbanization to fund sustainable development and financial inclusion

Biagio Bossone's picture

Urbanization, when combined with innovations in payments technologies (virtual and complementary currencies), provides an opportunity to finance sustainable city development funds and achieve financial inclusion for urban communities. Virtual and complementary currencies (in paper, electronic, or mobile forms) are representations of value (IMF, 2016) that urban populations can purchase with official currency and use in their daily intra-city payments transactions. Doing so would amount to intra-city bartering, leveraging urban population density to finance a city sustainable development fund with the official currency saved. This fund, equivalent to bank reserves but under community control, can in turn be leveraged to finance fixed assets (dwellings) and physical infrastructures in partnership with investors. By banking official currency through the sale of an appropriate means of intra-community payments (paper, electronic, or mobile), the urban unbanked could be financially included.

Do securities trading by banks crowd out lending to the real sector?

José-Luis Peydró's picture

In “Securities Trading by Banks and Credit Supply: Micro-Evidence”, we explore the effects of the financial crisis on securities trading by commercial banks and the subsequent effect of the latter in credit supply. We find that banks with higher trading expertise increase their investments in securities in crises and decrease their supply of credit.

Banks today hold a considerable amount of securities among their assets. However, there is an important policy and academic debate as to whether they should be able to do so. The investment behavior of banks is portrayed in Figure 1, where was a sharp decline in price in the security around 2009; at the same time, German banks with higher trading expertise increased their holdings of said security.