Financial Stability and Systemic Risk
** This page regroups the work of the different teams I led while working at the Milken Institute. Last update March 2023.
Financial Literacy in the U.S.
The 'Financial Literacy in the United States' report provides a comprehensive overview of the financial literacy landscape in the US. Unfortunately, our analysis paints a worrisome picture.
Share the Data: Overcoming Trade-Offs in Tech Regulation
Large tech companies and their customer-centric business models have led to gains in efficiency that have benefitted consumers and businesses worldwide. At the same time, the cross-sectoral nature of these companies exposes the world to new forms of risk by linking traditionally independent sectors, either directly by doing business in them or indirectly by providing infrastructure to third parties.
The (Near) Future of Central Bank Digital Currencies
The value of global cashless payments has been radically increasing worldwide. Despite cash being the most used payment instrument in the world, technological innovation and new consumer preferences are decisively transforming the way consumers pay and manage money. The COVID-19 pandemic may also have been an accelerator of the cashless mega-trend.
BigTech Companies: An Inclusive And Global Regulatory Framework Is Needed
We advocate for a change in the regulatory paradigm to create a framework that will accommodate the different priorities of countries, support inter-jurisdictional coordination, and minimize the risk of regulatory fragmentation.ESG Ratings: The Road Ahead
In this report, we highlight the need for data standardization, the importance of transparency in calculating ESG ratings, and show that a standard set of variables would partially resolve inconsistencies among rating providersDigital Money Is Here: G20 ('s Thinking) Has To Go Digital, Too
We urge the G20 to develop a comprehensive agenda with a systemic vision on digital money and finance that could guide a resilient financial system through a prudent transition process, keep pace with technology and deliver the long term benefits promised by [...]
Gender Equality Discussion within the G20
The W20 was created to, first, provide recommendations to the G20 on gender equality issues and, second, to set measurable and actionable goals and develop appropriate metrics and benchmarks to improve accountability in measuring progress. Over the past five years, its recommendations have concentrated on three main pillars: Labor inclusion, Financial inclusion, and Digital inclusion.
It Takes All Kinds: A Diverse Mix of Lenders Promotes Broad Access to Small Business Credit
Who lends to small businesses, and how is this changing over time? This paper challenges popular answers to this question. First, despite the growing role of non-banks, banks continue to be the most important source of credit for small businesses. Second,
Gender Equality Discussion within the G20
The W20 was created to, first, provide recommendations to the G20 on gender equality issues and, second, to set measurable and actionable goals and develop appropriate metrics and benchmarks to improve accountability in measuring progress. Over the past five years, its recommendations have concentrated on three main pillars: Labor inclusion, Financial inclusion, and Digital inclusion.
Monetary Policy and Financial System Resilience
In a time of global crisis, international policy coordination is quite natural. Yet, in normal times such coordination becomes a challenge. This is an issue especially when it comes to monetary and macroprudential policy of globally influential countries. This is especially relevant now with the trend of monetary normalisation in many of these countries.
In this brief, we propose four necessary steps to help addressing these challenges: (i) Monetary policy should take into account its spillovers on financial stability; (ii) Systemic central banks need to account for the global impact of their policy; (iii) Multilateral consultations may provide a useful platform to assess these impacts, and (iv) The analysis that helps designing monetary and macroprudential policy should include global aggregates to capture the global economic and financial context.
The Macroprudential Policy Framework Needs to Be Global
Basel III was a direct answer to the 2008 financial crisis. Now 10 years after the crisis, it is time to assess its timeliness and make the necessary adjustments so it becomes truly global.
In this policy brief, we first clarify the goals of macroprudential policy before highlighting the main challenges that home and host countries may run into when global financial institutions lend beyond their home countries.
We then suggest to focus on four priorities to address these vulnerabilities: (i) An adaptable and flexible global framework, (ii) The generalization of international standards and best practices, (iii) A stronger global data depository and (iv) Regulatory and monitoring cooperation
The Crypto-Assets Experience
This paper was originally published as part of T20 ARGENTINA. Crypto-Assets (CA) are digital instruments aimed to serve as mediums of exchange that rely on decentralized control and boast the (yet to prove) promise of a revolution in Finance. Their meteoric rise entails both opportunities and perils.
Commercial Real Estate: How Vulnerable Are U.S. Banks?
Banks are increasing their commercial real estate (CRE) exposure as signs of another robust boom in CRE activity become evident in many markets nationwide. At the same time, regulatory scrutiny over all but the largest banks is about to ease following Congress passage of new legislation amending the restrictive Dodd-Frank regulations.
Companies Rush to Go Private
Private capital markets have become a favored alternative source of company financing. In addition, private equity firms have become more innovative in developing options for financing the growth of small and emerging firms, and converting many publicly listed companies into private companies.
Beyond Unintended Consequences: Changes to Foreign Branch Behavior Illustrate Overlooked System-Wide Regulatory Effects
The interaction of unconventional U.S. monetary policy by the Fed and regulatory changes by the Federal Deposit Insurance Corporation (FDIC) and the Securities and Exchange Commission (SEC) changed the way foreign banks do business in the U.S.
Macroprudential Policy and Financial Stability: Where Do We Stand?
With the global economy gaining momentum following its recovery since 2008, and the new U.S. leadership's refocusing from financial stability efforts to developing blueprints for economic growth, parts of the post-crisis macroprudential framework have been reshaped, and new rules have been introduced.
Regulation Almost Destroyed Money Market Funds, But Cash Management Needs Kept Them Alive
Extensive regulatory overhaul in October 2016 changed the money market fund (MMF) industry considerably, especially for institutional clients. Nonetheless, MMFs continue to be an important cash management tool for institutions even though their asset allocations are now much more restricted to preserve the feature of a constant share price.
The Real Story Behind the Surge in FHLB Advances: Macroprudential Policy Changed How Banks Borrow
In the wake of the 2008 global financial crisis and ensuing regulatory reforms, U.S. banks dramatically altered their sources of funding. Funding from non-deposit sources now accounts for only 13 percent of bank liabilities, compared with more than 30 percent 10 years ago. However, bank funding
The Asset Management Industry, Systemic Risk, and Macroprudential Policy
In the aftermath of the 2007-2008 financial crisis, new legislation and regulations have pressured banks and insurance companies to reduce their size, leverage, and riskier lines of business in order to avoid another too-big-to-fail debacle.
Central Counterparties Help, But Do Not Assure Financial Stability
This paper looks into the role central counterparties (CCPs) play by stepping into the middle of trades and the benefits they provide to market participants but to the overall promotion of financial stability. Several key observations are presented while also highlighting some commonly held misconceptions and overly-complacent conclusions about CCPs ability to stabilize financial markets, especially in the presence of systemic shocks.
UK Financial Reforms: Bank of England 2.0
A few months ago, we produced a timetable for the implementation of U.S. financial reform under the Dodd-Frank Act. One of the main observations was that the legislation did little to consolidate regulation outside of banking. In contrast, the analogous UK reform legislation, the Financial Services Act, made the Bank of England (BoE) the center of UK financial and monetary stability.
Financial Deregulation: Repeal or Adjust?
While a major overhaul of U.S. financial regulation may be unlikely during the early months of the Trump administration, changes should be expected as his nominees to lead the Treasury Department and financial regulatory agencies are confirmed.
Dodd-Frank: Washington, We Have a Problem
The Dodd-Frank Act is the most far-reaching financial regulatory reform in the U.S. since the nation emerged from the Great Depression in the 1930s. The act aims to limit systemic risk, allow for the safe resolution of the largest intermediaries, submit risky nonbanks to greater scrutiny, and reform derivatives trading.
The Asset Management Industry and Systemic Risk: Is There a Connection?
In the aftermath of the 2007-2008 financial crisis, new legislation and regulations have pressured banks and insurance companies to reduce their size, leverage, and riskier lines of business in order to avoid another too-big-to-fail debacle.
Macroprudential Policy: Silver Bullet or Refighting the Last War?
In the wake of the global financial crisis, policymakers, investors, and lenders analyzed the lead-up to the meltdown to see what changes could prevent another near-collapse. The result: a new focus on how macroprudential policy can reduce systemic risk. In this report we explore the emerging macroprudential policy discussion and the implications for broader monetary policy.
Trade Finance: A Catalyst for Growth in Asia
While large businesses have resumed international trade at levels seen before the financial crisis, small- and medium-sized enterprises (SMEs) have not fared as well. For these firms - the backbone of economies everywhere - growth is impeded by the limited availability of bank loans to finance trade.