Föhrenbergkreis Finanzwirtschaft

Unkonventionelle Lösungen für eine zukunftsfähige Gesellschaft

Posts Tagged ‘Risk’

Three Risks to the Global Financial System as Debt Hits Record Levels

Posted by hkarner - 7. Oktober 2016

Date: 06-10-2016
Source: The Wall Street Journal

IMF urges major restructuring of the European banking system and sees emerging-market corporate defaults on the rise

Deutsche Bank CC1Deutsche Bank headquarters in Frankfurt. Like other European banks, the German financial giant has come under pressure from investors wary of the company’s ability to turn a profit.

In recent years, the global financial system has weathered Brexit, China’s deceleration and emerging market mayhem.

But there’s no reason to be complacent, the International Monetary Fund warns in its latest reports on global financial stability and the fiscal health of economies around the world.

“The passing of these near-term risks has seen volatility fall and equity prices in advanced economies rise,” says Peter Dattels, deputy director of the fund’s monetary and capital markets department. “But medium-term risks are building because we are entering a new era of challenges.”

An unprecedented era of ultralow interest rates and feeble growth has led to a record buildup in global debt levels. Den Rest des Beitrags lesen »

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The insurance sector and systemic risk

Posted by hkarner - 27. Juli 2016

Gaston Gelos, Nico Valckx

Division Chief of the Global Financial Stability Analysis Division, IMF

Senior Economist, Global Financial Stability Analysis Division, IMF

27 July 2016, voxeu

Insurance companies – life insurers, as well as providers of property, casualty, health, and financial coverage – perform important economic functions and are big players in financial markets. Traditionally, however, they were not considered to pose systemic risks. Insurers have longer-term liabilities than banks, a greater diversification of assets, and less extensive interconnections with the rest of the financial system. However, the near-collapse of AIG during the Global Crisis prompted a rethinking of the sector’s systemic riskiness. A number of insurance firms were subsequently among the financial institutions designated as globally systemically important. Den Rest des Beitrags lesen »

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Nature’s Answer to Climate Risk

Posted by hkarner - 27. Mai 2016

Photo of Maria Damanaki

Maria Damanaki

Maria Damanaki, former EU Commissioner for Maritime Affairs and Fisheries, is Global Managing Director for Oceans at The Nature Conservancy.

MAY 26, 2016, Project Syndicate

LONDON – Nearly half the world’s population – some 3.5 billion people – lives near coasts. As climate change exacerbates the effects of storms, flooding, and erosion, the lives and livelihoods of hundreds of millions of those people will be at risk. In fact, the latest edition of the World Economic Forum’s World Risk Assessment Report names failure to adapt to the effects of climate change as the single greatest risk, in terms of impact, to societies and economies around the world.

Beyond endangering lives, more frequent and stronger storms could cost many billions of dollars, owing to infrastructure damage and lost revenues from farming, fisheries, and tourism. And, as the Harvard Business Review recently noted, the projected cost rises with each new study. Yet the international community currently spends on risk mitigation less than one-fifth of what it spends on natural-disaster response. Den Rest des Beitrags lesen »

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The Global Economy Confronts Four Geopolitical Risks

Posted by hkarner - 29. Dezember 2015

Photo of Martin Feldstein

Martin Feldstein

Martin Feldstein, Professor of Economics at Harvard University and President Emeritus of the National Bureau of Economic Research, chaired President Ronald Reagan’s Council of Economic Advisers from 1982 to 1984. In 2006, he was appointed to President Bush’s Foreign Intelligence Advisory Board, and, in 2009, was appointed to President Obama’s Economic Recovery Advisory Board. Currently, he is on the board of directors of the Council on Foreign Relations, the Trilateral Commission, and the Group of 30, a non-profit, international body that seeks greater understanding of global economic issues.

DEC 28, 2015, Project Syndicate

CAMBRIDGE – The end of the year is a good time to consider the risks that lie ahead of us. There are of course important economic risks, including the mispricing of assets caused by a decade of ultra-low interest rates, the shifts in demand caused by the Chinese economy’s changing structure, and European economies’ persistent weakness. But the main longer-term risks are geopolitical, stemming from four sources: Russia, China, the Middle East, and cyberspace. Den Rest des Beitrags lesen »

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The Middle East Meltdown and Global Risk

Posted by hkarner - 1. Oktober 2015

Photo of Nouriel Roubini

Nouriel Roubini

Nouriel Roubini, a professor at NYU’s Stern School of Business and Chairman of Roubini Global Economics, was Senior Economist for International Affairs in the White House’s Council of Economic Advisers during the Clinton Administration. He has worked for the International Monetary Fund, the US Federal Reserve, and the World Bank.

OCT 1, 2015, Project Syndicate

NEW YORK – Among today’s geopolitical risks, none is greater than the long arc of instability stretching from the Maghreb to the Afghanistan-Pakistan border. With the Arab Spring an increasingly distant memory, the instability along this arc is deepening. Indeed, of the three initial Arab Spring countries, Libya has become a failed state, Egypt has returned to authoritarian rule, and Tunisia is being economically and politically destabilized by terrorist attacks.

The violence and instability of North Africa is now spreading into Sub-Saharan Africa, with the Sahel – one of the world’s poorest and most environmentally damaged regions – now gripped by jihadism, which is also seeping into the Horn of Africa to its east. And, as in Libya, civil wars are raging in Iraq, Syria, Yemen, and Somalia, all of which increasingly look like failed states. Den Rest des Beitrags lesen »

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Risk tolerance of men and women

Posted by hkarner - 21. September 2015

Francesco D’Acunto 20 September 2015, voxeu

Assistant Professor of Finance at the R.H.Smith School of Business, University of Maryland

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Shock-Resistant Eurozone Appears Far Off

Posted by hkarner - 20. September 2015

Date: 19-09-2015
Source: The Wall Street Journal

With disparate proposals to cut risk in the currency union, Europe’s finance chiefs have raised a high bar to progress

After ignoring the question of how to make the eurozone more shock-resistant for the better part of a year, the currency union’s finance chiefs seem to have found a new way of avoiding progress: pushing so many different ideas at once that gridlock is unavoidable.

First out the gate was French Economy Minister Emmanuel Macron, who wants the eurozone to set up an economic government, with its own budget and parliament, as well as a finance minister to distribute investments and steer labor-market policies. “The status quo will lead to self-destruction,” Mr. Macron warned in a recent interview with German daily Süddeutsche Zeitung.

A few days later, Jeroen Dijsselbloem, the Dutch finance minister who also presides over the meetings of his eurozone colleagues, suggested that what the currency union needs is more “convergence,” or streamlining, of national economic policies—but no new institutions to enforce, incentivize or legitimize them. If governments want their citizens’ support for the euro, they have to ensure it leads to prosperity and prevent one country’s bad tax rules from creating problems for its neighbors, said Mr. Dijsselbloem.

Next up was Jean-Claude Juncker, the president of the European Commission, who in his “State of the European Union” speech promised to present proposals for a European deposit-guarantee system in the coming year and, further down the line, a European treasury.

Many economists see a common system for insuring deposits as a logical—and necessary—part of the eurozone’s “banking union,” complementing the centralized supervisor and the resolution authority that were created to prevent failing banks from bankrupting their governments. In other words, once a broken lender has been identified and the cost of resolving it has been shared among its shareholders and creditors, what is needed is a big pot of money to compensate savers with less than EUR100,000 in their accounts.

The commission proposal is likely to be less ambitious. Instead of having one fund for all 19 euro countries, the proposed system is expected to supplement national funds running low on their own resources with credit lines from their eurozone counterparts.

Even this scaled-down reinsurance system is too much for Germany, the leading opponent of mutualizing risks in the currency union. Yet, rather than ruling it out from the get-go, Finance Minister Wolfgang Schäuble is pursuing a new strategy.

“One has to be careful not to put the cart before the horse,” he told reporters after discussing the issue with his eurozone colleagues on Saturday.

Before teaming up to protect savers, Mr. Schäuble argued, the bloc has to take a host of other steps. Among them are obvious ones—such as requiring all countries to actually implement the agreed rules on imposing losses on bank investors—but also some that are clearly designed to delay progress. These include requirements for banks to build up capital buffers for government bonds and a system to restructure excessive government debts. (Finland, a traditional ally of Germany, has already convened its own expert group to look at how best to restructure sovereign bonds).

Even a eurozone finance minister isn’t unthinkable, Mr. Schäuble said, but before going there, the decision on whether national budgets are in line with EU rules should be taken out of the hands of the European Commission. Instead of the EU executive, which he said is less strict with large countries such as Germany or France, an independent “fiscal board” should be given the power to strike down national spending plans.

With this wish list Mr. Schäuble pulled a classic divide-and-rule move. Obvious supporters for a common deposit-insurance system and a centralized budget such as Italy or Portugal are bound to block any initiatives that would make their own large debts seem less safe. The European Central Bank, which favors a strong banking union, meanwhile, doesn’t want to get rid of the zero-risk labeling for government bonds in the eurozone unless others around the globe do the same for their own debts.

There are some ways to unblock the logjam. Rather than immediately force banks to hold significant capital on their holdings of government bonds, European regulators could set limits for how many bonds from one country a bank can hold, suggests Christian Odendahl, chief economist at the London-based Centre for European reform. That, he says, could help overcome German resistance to a limited deposit reinsurance system.

But officials involved in the discussions among ministers aren’t overly optimistic. “There’s no pressure,” says one of them. With policy makers’ attention focused on dealing with the refugee crisis and no imminent threat to the eurozone, progress on reinforcing Europe’s monetary union is bound to be slow.

“Improving EMU can only happen if we move in parallel on all fronts,” Benoît Cœuré, the French member of the ECB’s executive board, said after ministers’ deliberations last week.

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Risk taking and firm growth

Posted by hkarner - 4. August 2015

Peng Xu 03 August 2015, voxeu

Professor and Director, Institute of Comparative Economic Studies, Hosei University

According to Hofstede’s analysis, Japan is one of the most uncertainty-avoiding countries. Indeed, Japanese firms exhibit the lowest level of risk taking in the cross-country analysis of John et al. (2008). Den Rest des Beitrags lesen »

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Reinsurance: Compacts of god

Posted by hkarner - 30. Mai 2015

Date: 28-05-2015
Source: The Economist

The market for risk is changing

Let’s hope they issued cat bonds

INSURANCE only works if reinsurance works, those in the business say. An insurer that would face crippling losses if, say, a hurricane struck an island where it had covered lots of property against extreme weather, would typically insure itself against such an event with a reinsurer. But the $425 billion industry is under threat as insurers increasingly offload risk directly to capital markets instead. This month Warren Buffett, who has investments in reinsurance, dismissed it as a “fashionable asset class” whose prospects have “turned for the worse”. Den Rest des Beitrags lesen »

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Ten Take Aways from the “Rethinking Macro Policy: Progress or Confusion?”

Posted by hkarner - 2. Mai 2015

An excellent report on the current thinking (hfk)

Posted on by iMFdirect

blanchBy Olivier Blanchard

On April 15-16, the IMF organized the third conference on “Rethinking Macro Policy.

Here are my personal take aways.

1. What will be the “new normal”? 

I had asked the panelists to concentrate not on current policy challenges, but on challenges in the “new normal.” I had implicitly assumed that this new normal would be very much like the old normal, one of decent growth and positive equilibrium interest rates. The assumption was challenged at the conference.

On the one hand, Ken Rogoff argued that what we were in the adjustment phase of the “debt supercycle.” Such financial cycles, he argued, end up with debt overhang, which in turn slows down the recovery and requires low interest rates for some time to maintain sufficient demand.  Under that view, while it may take a while for the overhang to go away, more so in the Euro zone than in the United States, we should eventually return to something like the old normal.

On the other hand, Larry Summers argued that, while debt overhang was clearly relevant, more was going on.  He expanded on his secular stagnation hypothesis, arguing that, in the context of a chronic excess of saving over investment, keeping the economy at potential may well require very low or even negative real interest rates.  He pointed out that real interest rates had started declining long before the crisis, and pointed also to the further decline in long rates since he first stated this hypothesis at an IMF conference last year. If he is right, the new normal will not be like the old normal. Den Rest des Beitrags lesen »

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