Freedom of contract and financial stability through the lens of the legal theory of finance (LTF) - LTF approaches to ABS, pari passu-clauses, CCPs, and Basel III

This paper is the outcome of a related broader project, exploring the explanatory power of the Legal Theory of Finance, which proposes a new institution-based analytical framework for the analysis of phenomena of financi
This paper is the outcome of a related broader project, exploring the explanatory power of the Legal Theory of Finance, which proposes a new institution-based analytical framework for the analysis of phenomena of financial markets. One of its most important theoretical assumptions, the legal construction of financial markets, is highlighted by the example of the private creation of money by structured finance products in this paper. Further implications can then be shown referring to pari passu clauses and collective action clauses, which are both exhibit a differential application of these legal rules according to the hierarchical status of the respective market participant, and can therefore endanger sovereign debt restructurings. Legal instruments to avoid this are briefly explored. An example of another key role of the law in crisis that is the task to resolve the tension between market discipline and financial stability is exemplified by the regulation of the OTC derivatives market and proposals of effective loss-sharing among CCPs. Related questions about the significance of legal rules to ensure financial stability are raised in the analysis of minimum capital requirements under Basel III.
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Metadaten
Author:Brigitte Haar
URN:urn:nbn:de:hebis:30:3-416936
URL:https://ssrn.com/abstract=2831713
Parent Title (English):SAFE working paper series ; No. 141
Series (Serial Number):SAFE working paper series (141)
Publisher:SAFE
Place of publication:Frankfurt am Main
Document Type:Working Paper
Language:English
Year of Completion:2016
Year of first Publication:2016
Publishing Institution:Universitätsbibliothek Johann Christian Senckenberg
Release Date:2016/10/20
Tag:Basel III; Coco bonds; asset-backed securities; central counter parties; collective action clauses; financial contracts; financial stability; law and finance; otc derivatives markets; pari passu clauses; structured finance
Pagenumber:19
HeBIS PPN:390298344
Institutes:Wirtschaftswissenschaften
House of Finance (HoF)
Center for Financial Studies (CFS)
Sustainable Architecture for Finance in Europe (SAFE)
Dewey Decimal Classification:330 Wirtschaft
JEL-Classification:G38 Government Policy and Regulation
K12 Contract Law
K20 General
K22 Corporation and Securities Law
N20 General, International, or Comparative
O12 Microeconomic Analyses of Economic Development
Sammlungen:Universitätspublikationen
Licence (German):License Logo Veröffentlichungsvertrag für Publikationen

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