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This paper surveys the recent academic literature on the economics of cross-border regulatory cooperation as well as recent policy developments in this area. While institutional arrangements of cross-border regulatory cooperation used to focus on day-to-day supervisory tasks, the crisis has given an impetus to a focus on cooperation at the bank resolution stage, with an array of different cooperation forms. A growing theoretical literature has documented different externalities arising from national supervision of cross-border banks, while empirical evidence has been relatively scarce. The paper concludes with a forward looking agenda both for policy reform and academic research in this area. [ABSTRACT FROM AUTHOR]

This paper reviews the market failures that may justify the need for liquidity regulation, assesses whether liquidity regulation is a necessary complement to Lender of Last Resort (LOLR) policies, capital regulation and prompt corrective action, surveys the available evidence on the net benefits of liquidity regulation, and concludes by outlining research directions useful to improve bank regulation design. [ABSTRACT FROM AUTHOR]

‘Too big to fail’ traditionally refers to a bank that is perceived to generate unacceptable risk to the banking system and indirectly to the economy as a whole if it were to default and be unable to fulfill its obligations. Such a bank generally has substantial liabilities to other banks through the payment system and other financial links, which can be sources of ‘contagion’ if a bank fails. The main objectives in this paper are to identify the different dimensions of too big to fail and evaluate various proposed reforms for dealing with this problem. In addition, we document the various dimensions of size and complexity, which may contribute to or reduce a bank's systemic risk. Furthermore, we provide an assessment of economic and political factors shaping the future of too big to fail. [ABSTRACT FROM AUTHOR]

Financial supervision focuses on the aggregate (macroprudential) in addition to the individual (microprudential). But an agreed framework for measuring and addressing financial imbalances is lacking. We propose a holistic approach for the financial system as a whole, beyond banking. Building on our model of financial amplification, the financial cycle is the key variable for measuring financial imbalances. The cycle can be curbed by leverage restrictions that might vary across countries. We make concrete policy proposals for the design of macroprudential instruments to simplify the current framework and make it more consistent. [ABSTRACT FROM AUTHOR]

This paper describes the Danish mortgage system by comparing it with the UK mortgage system. The Danish mortgage system has attracted attention in the literature on the design of mortgage systems. It is a type of narrow banking model where mortgage loans are financed by specialised institutions that issue bonds with cash flows that match that of the mortgage loans. Thereby, the Danish mortgage system outsources many of the risks that are usually kept on the balance sheet of banks to bond investors. Measured in terms of four criteria, the Danish mortgage system performed better during the financial crisis than the UK mortgage system. However, both in Denmark and the UK, alignment of the mortgage and the pension systems could offer significant advantages. [ABSTRACT FROM AUTHOR]

This Article examines the relationship between the developing European Union (EU) system of banking supervision and the theories of constitutional pluralism. It questions the remaining epistemic, explanatory, and normative value of these theories with regard to the EU system of banking supervision. The argument is broken down into three parts. First, the Article briefly describes the system of banking supervision in the European Union and the pluralist challenges that it spurs. Second, it schematically maps out the leading theories of constitutional pluralism to test, by way of their application to the field of EU banking supervision, their epistemic, explanatory, and normative value. Finally, to the extent that this value has diminished, the Article offers another pluralist theory, not a constitutional one, which could supplement the identified epistemic, explanatory, and normative gaps. This is a theory of administrative pluralism. [ABSTRACT FROM AUTHOR]

The global financial crisis of 2008 was a reflection point for global economic governance. The crisis, which started in the U.S. banking system and had a disproportionate impact on North America and Europe, provoked widespread contemplation of the legitimacy, relevance, and effectiveness of the core ideas, rules, and structures that have governed the world economy over the past century. In turn, the crisis also illuminated the emergence of new players, power dynamics, and paradigms that promise to challenge—if not fundamentally change—the characteristics of the institutional architecture that has governed international finance, trade, and development since the end of World War II. [ABSTRACT FROM AUTHOR]

Since the onset of the Federal Reserve's unconventional programme of large-scale asset purchases, known as quantitative easing (QE), some economists and financial practitioners have feared that the consequent buildup of the Fed's balance sheet could lead to a large expansion of the money supply, and that such an increase could cause a sharp rise in inflation. So far fears about induced inflation have not been validated. This article examines the basis for the original concerns about inflation in terms of the classic quantity theory of money, which holds that inflation occurs when the money supply expands more rapidly than warranted by increases in real production. The article first reviews the US experience and shows that whereas rapid money growth might have been a plausible explanation of inflation in the 1960s through the early 1980s, subsequent data have not supported such an explanation. It then shows that the quantity theory of money has not really been put to the test after the Great Recession, because a sharp increase in banks’ excess reserves and corresponding sharp decline in the ‘money multiplier’ has meant that the rise in the Federal Reserve's balance sheet has not translated into increased money available to the public in the usual fashion. The most likely aftermath of quantitative easing remains one of benign price behaviour. However, if nascent inflationary conditions materialise, the Federal Reserve will need to manage adroitly the large amounts of banks’ excess reserves that have accumulated as a consequence of QE in order to limit inflationary pressures. [ABSTRACT FROM AUTHOR]

The production of this forecast is supported by the Institute's Corporate Members: Bank of England, HM Treasury, Mizuho Research Institute Ltd, Office for National Statistics, Santander (UK) plc and by the members of the NiGEM users group. [ABSTRACT FROM AUTHOR]

An introduction is presented in which the editor discusses various reports within the issue on topics including several regulatory policies discussed after the Global Financial Crisis in 2008, connection of liquidity regulation with the GFC, and growth of cross-border banking.