International Financial Integration In The Aftermath Of The Global Financial Crisis

This paper documents the evolution of international financial integration since the global financial crisis using an updated dataset on external assets and liabilities, covering over 210 economies for the period 1970-2015. It finds that the growth in cross-border positions in relation to world GDP has come to a halt. This reflects much weaker capital flows to and from advanced economies, with diminished cross-border banking activity, and an increase in the weight of emerging economies in global GDP, as these economies have lower external assets and liabilities than advanced economies. Cross-border FDI positions have continued to expand, unlike positions in portfolio instruments and other investment. This expansion reflects primarily positions vis-à-vis financial centers, suggesting that the complexity of the corporate structure of large multinational corporations is playing an important role. The paper also explores the cross-country drivers of foreign ownership of domestic debt securities, highlighting in particular the role of the euro debt crisis in explaining its evolution.

Early in the new millennium it appeared that a long period of financial crisis had come to an end, but the world now faces renewed and greater turmoil. This 2010 volume analyses the past three decades of global financial integration and governance and the recent collapse into crisis, offering a coherent and policy-relevant overview. State-of-the-art research from an interdisciplinary group of scholars illuminates the economic, political and social issues at the heart of devising an effective and legitimate financial system for the future. The chapters offer debate around a series of core themes which probe the ties between public and private actors and their consequences for outcomes for both developed markets and developing countries alike. The contributors argue that developing effective, legitimate financial governance requires enhancing public versus private authority through broader stakeholder representation, ensuring more acceptable policy outcomes.

This collection gathers experts from Africa, North America, Asia and Europe to examine international policy responses to the 2008 global financial crisis. In doing so they reveal the implications for international cooperation, coordination and institutional change in global economic governance, and identify ways to reform and even replace the architecture created in the mid 20th century in order to meet the global challenges of the 21st.

The ongoing global financial crisis is rooted in a combination of factors common to previous financial crises and some new factors. The crisis has brought to light a number of deficiencies in financial regulation and architecture, particularly in the treatment of systemically important financial institutions, the assessments of systemic risks and vulnerabilities, and the resolution of financial institutions. The global nature of the financial crisis has made clear that financially integrated markets, while offering many benefits, can also pose significant risks, with large real economic consequences. Deep reforms are therefore needed to the international financial architecture to safeguard the stability of an increasingly financially integrated world.

The Global Financial Crisis of 2007-2009 has highlighted the resilience of the financial markets and economies from the developing world. This title investigates and assesses the impact and response to the crisis from an emerging markets perspective including asset pricing, contagion, financial intermediation, market structure and regulation.

Although cross-border bank lending has fallen sharply since the crisis, extending our bank ownership database from 1995-2009 up to 2013 shows only limited retrenchment in foreign bank presence. While banks from OECD countries reduced their foreign presence (but still represent 89% of foreign bank assets), those from emerging markets and developing countries expanded abroad and doubled their presence. Especially advanced countries hit by a systemic crisis reduced their presence abroad, with far flung and relatively small investments more likely to be sold. Poorer and slower growing countries host fewer banks today, while large investments less likely expanded. Conversely, faster host countries’ growth and closeness to potential investors meant more entry. Lending by foreign banks locally grew more than cross-border bank claims did for the same home-host country combination, and each was driven by different factors. Altogether, our evidence shows that global banking is not becoming more fragmented, but rather is going through some important structural transformations with a greater variety of players and a more regional focus.

Critical Issues in International Financial Reform ad- dresses weaknesses of the current international financial system and potential beneficial reforms. The focus is on the countries of Latin America and the Caribbean, but the authors also take into account relevant lessons from the experience of Canada, a country highly integrated into world and hemispheric trade and financial markets. Critical Issues offers a new perspective on a discussion too often dominated by interest groups that take strong, even rigid, positions on issues with limited understanding of the technical aspects of the issues, and little concern for the interests of the developing world. Its chapters have been written by experts in the economic, political, and social aspects of the international financial integration of developing countries. Financial crises and their associated social and economic traumas are the most apparent symptom that something is amiss in the process of world economic integration. But there are also broader questions about the nature and magnitude of the benefits and costs of increased international capital flows for different groups of countries in the developing and developed worlds. For example, even in the absence of turbulence, is it optimal for all participants that capital movements be as free as possible? Does capital inflow discourage domestic savings to a degree that should cause worry? Are some types of flows inherently more beneficial than others--for instance, direct investment flows versus flows into host stock markets? How can the instability of capital movements best be curtailed? These questions concern the contributors to this volume. This volume demonstrates that the evolution of the world financial system, its various problems, and what is or is not done about them require an understanding of the links among financial, economic, and political variables. Critical Issues in International Financial Reform is an important contribution to this debate, and will be of value to researchers in economic policy, history, and international politics. Albert Berry is professor of economics at the University of Toronto and research director of the Program on Latin America and the Caribbean. Gustavo Indart is special lecturer of economics and the coordinator of the Program on Latin America and the Caribbean at the University of Toronto. "The papers in this conference volume are grounded on solid economic theory and empirical research, and take a critical view of the prescriptions of the so-called Washington Consensus and of the policies followed in most developing countries under the advice of the international financial institutions (IFIs). The economics and the political economy of their current financial arrangements, in which the IFIs play such an importnat role, are given a thorough treatment. This volume is a very valuable contribution to a debate that interests both academics and policymakers. The thirteen papers are uniformly of high quality and are often very innovative."--Juan-Antonio Morales, president, Central Bank of Bolivia "A stimulating and balanced set of analyses, drawing insightfully upon comparative experiences, of national and international financial systems and their reform, both actual and potential. It is unusual and welcome in its effective blending of political and economic insights, and its use of analyses that are refreshingly skeptical of orthodox presumptions."--Gerald Helliner, University of Toronto

' Ever since the Great Recession, the global financial regulatory system has undergone significant changes. But have these changes been sufficient? Have they created a new problem of over-regulation? Is the system currently in a better position than in the pre-Recession years, or have we not adequately addressed the basic causes of the financial crisis and resulting Great Recession? These were the questions and issues addressed in the seventeenth annual international banking conference held at the Federal Reserve Bank of Chicago in November 2014. In collaboration with the Bank of England, the theme of the conference was to examine the state of the new global financial system as it has evolved in response to significant market changes and regulatory reforms triggered by the global financial crisis. The papers from that conference are collected in this volume, with contributions from an international array of government officials, regulators, industry practitioners and academics. Contents:Special Addresses:Financial Entropy and the Optimality of Over-regulation (Alan S Blinder)Implementing the Regulatory Reform Agenda: The Pitfall of Myopia (Stefan Ingves)A Financial System Perspective on Central Clearing of Derivatives (Jerome H Powell)Regulatory and Market Response to the Financial Crisis — Banking:Shadow Banking in China (Andrew Sheng)Fed Liquidity Policy during the Financial Crisis: Playing For Time (Robert Eisenbeis and Richard Herring)Europe''s Banking Union: Status and Prospects (Nicolas Véron)Regulatory and Market Response to the Financial Crisis — Capital Markets:Capital Market Regulation in Japan after the Global Financial Crisis (Takeo Hoshi and Ayako Yasuda)Systemic Risk and Public Institutions: Evolving Perspectives from the Financial Crisis (Chester Spatt)Securities Regulation During and After the 2008 Financial Crisis (Jennifer E Bethel and Erik R Sirri)Regulatory Reform, its Possible Market Consequences and the Case of Securities Financing (David Rule)Resolving Systemically Important Financial Institutions and Markets:A Critical Evaluation of Bail-in as a Bank Recapitalization Mechanism (Charles Goodhart and Emilios Avgouleas)Resolving Systemically Important Financial Institutions and Markets (Adam Ketessidis)The Role of Bankruptcy in Resolutions (Kenneth E Scott)The Single Point of Entry Resolution Strategy and Market Incentives (James R Wigand)Transitional Impact of the Reforms on the Financial Sector:Model Risk and the Great Financial Crisis: The Rise of Modern Model Risk Management (Jeffrey A Brown, Brad McGourty and Til Schuermann)Banking in a Re-Regulated World (Luc Laeven)Financial Reform in Transition (Philipp Hartmann)Transitional Impact of the Reforms on the Real Sector:The Jury Is In (Stephen G Cecchetti)Regulations, Reforms, and the Real Sector (Martin Čihák)Financial Fragmentation, Real-sector Lending, and the European Banking Union (Giovanni Dell''Ariccia)New Capital and Liquidity Requirements: Transitional Effects on the Economy (Douglas J Elliott)Long-term Cumulative Steady State Outcome of Reforms — Future Concerns?:Some Effects of Capital Regulation When There are Competing, Nonbank Lenders (Mark J Flannery)The Steady State of the Banking Union (Dirk Schoenmaker)Resolving Systemically Important Entities: Lessons from the Government Sponsored Enterprises (Mark Calabria)Policy Panel — Where to from Here?:Assessing the Overall Impact of Financial Reforms (Svein Andresen)Financial Regulation: Where to From Here? (Vitor Constâncio)Where To From Here?: Financial Regulation 2.0 (Andrew W Lo)Key Fragilities of the Financial System (Randall S Kroszner)Where to From Here for Financial Regulatory Policy?: Analyzing Housing Finance (David Scharfstein) Readership: Advanced economics, finance and policy undergraduates and postgraduates; finance professionals; policy makers and researchers who are interested in financial systems and analysis of regulations put into place post-Recession. Keywords:Financial Stability;Systemic Risk;Financial Regulation;Too-Big-to-Fail;Regulatory Burden;Financial Institutions'