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Financial Sector

Shifting Tectonic Plates under Global Banking

Otaviano Canuto's picture

The global financial crisis has reversed an expansionary trend of international activities by banks from advanced countries that had been at play for decades. From the late 1970s to 2008, banks not only found new opportunities for intermediation in increasing cross-border capital flows, but they also raised their profile in domestic credit provision abroad. We are now watching an upheaval of that landscape, its ground dramatically shifting with the unfolding of the crisis.

Is Shadow Banking Dangerous for You?

Otaviano Canuto's picture

payment bookFrom hedge funds to mortgage-backed securities, unregulated and risky activities have fallen out of favor since the Lehman Brothers debacle. Aggressive, casino-type behaviors and obscure transactions definitely played an important role in the run up to the financial crisis of 2008. But are all financial activities that operate outside the regular banking system bad?

Goodbye Financial Engineers, Hello Political Wonks

Otaviano Canuto's picture

This week marks the fifth anniversary of the global financial crisis. Five years ago, the world of finance was shocked when BNP Paribas announced a freeze of three of its money market funds that were undergoing a deadly run of withdrawals. At that moment, a huge pyramid of complex financial assets—then sustained as collateral accepted by banks and the “shadow banking system”—hedge funds and money market funds—started to crumble.

Capital Account Liberalization: Are there Lessons to be Learned?

Otaviano Canuto's picture

Photo: WikiCommons User, CopyLeftAfter the Second World War, advanced economies began an ambitious process toward capital account liberalization, which prioritized the liberalization of trade, the maintenance of fixed exchange rates, and a commitment to current account convertibility.

Managing Economic Policy in a Multipolar World

Otaviano Canuto's picture

It’s no secret that current account imbalances exist around the world. In many cases, these imbalances may be benign and merely reflect market-driven differences in savings and investment or differences in stages of development. In other cases, persistent global imbalances may be unsustainable and may threaten growth in the long-run. Thus, it’s no surprise that addressing imbalances has been a key focus in recent G-20 discussions.

The Cost of Financial Reform for Emerging Markets

Otaviano Canuto's picture

In the aftermath of the global economic crisis, financial market regulators have proposed a myriad of reforms to better govern the banking sector and to enhance its resilience to future shocks. In fact, in September 2010, a number of measures were agreed upon by the Basel Committee on Banking Supervision, an international forum designed to foster cooperation and develop standards on banking supervisory matters.

Picking Up The Pieces

Otaviano Canuto's picture

For the 600 million people living in fragile and conflict affected economies, the threat of relapsing into violence and slipping into deeper poverty is a reality they must face every day. Believe it or not, poverty rates average 54% in fragile and postconflict economies, compared with 22% for low-income countries as a whole. Weak institutions and a lack of local capacity further undermine the delivery of core services, such as security, rule of law, and other public goods.

So what happens when the fighting stops and the reconstruction begins? What happens to local capacity in countries where qualified civil servants have either fled to escape the conflict or were killed during it? A new study on public financial management reforms, produced by the World Bank’s fragile states and public sector governance units, shows that progress is possible even in such difficult circumstances.

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