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Effective market discipline incentivizes financial institutions to limit their risk-taking behavior, making it a key element for financial regulation. However, without adequate incentives to monitor and control the risk-taking behavior of financial institutions market discipline erodes. As a consequence, bailing out financial institutions, as happened unprecedentedly during the recent financial crisis, may impose indirect costs to financial stability if bailout expectations of investors change. Analyzing US data covering the period between 2004 and 2014, Hett und Schmidt (2017) find that market participants adjusted their bailout expectations in response to government interventions, undermining market discipline mechanisms. Given these findings, policymakers need to take into account the potential effects on market discipline when deciding about public support to troubled financial institutions in the future. Considering the parallelism of events and public responses during the financial crisis as well as the recent developments of Italian banks, these results not only concern the US, but also have important implications for European financial markets and policy makers.
This paper analyzes the relationship between monetary policy and financial stability in the Banking Union. There is no uniform global model regarding the relationship between monetary policy-making on the one hand, and prudential supervision on the other. Before the crisis, EU Member States followed different approaches, some of them uniting monetary and supervisory functions in one institution, others assigning them to different, neatly separated institutions. The financial crisis has underlined that monetary policy and prudential supervision deeply affect each other, especially in case of systemic events. Even in normal times, monetary and supervisory decisions might conflict with each other. After the crisis, some jurisdictions have moved towards a more holistic approach under which monetary policy takes supervisory considerations into account, while supervisory decisions pay due regard to monetary policy.
The Banking Union puts prudential supervision in the hands of the European Central Bank (ECB), the institution responsible for monetary policy. Nevertheless, at its establishment there was the political understanding that the ECB should follow a policy of meticulous separation in the discharge of its different functions. This raises the question whether the ECB may pursue a holistic approach to monetary policy and supervisory decision-making, respectively. On the basis of a purposive reading of the monetary policy mandate and the SSM Regulation, the paper answers this question in the affirmative. Effective monetary policy (or supervision) requires financial stability (or smooth monetary policy transmission). Moreover, without a holistic approach, the SSM Regulation is more likely to provoke the adoption of mutually defeating decisions by the Governing Board. The reputation of the ECB would suffer considerably under such a situation – in a field where reputation is of paramount importance for effective policy.
As any meticulous separation between monetary and supervisory functions turns out to be infeasible, the paper explores the reasons. Parting from Katharina Pistor’s legal theory of finance, which puts the emphasis on exogenous factors to explain the (non)enforcement of legal rules, the paper suggests a legal instability theorem which focuses on endogenous reasons, such as law’s indeterminacy, contextuality, and responsiveness to democratic deliberation. This raises the question whether the holistic approach would be democratically legitimate under the current framework of the ESCB. The idea of technocratic legitimacy that exempts the ECB from representative structures is effectively called into question by the legal instability theorem. This does not imply that the independence of the ECB should be given up, as there are no viable alternatives to protect monetary policy against the time inconsistency problem. Rather, any solution might benefit from recognizing the ECB in its mixed technocratic and political shape as a centerpiece of European integration and improving.
We extend the classical ”martingale-plus-noise” model for high-frequency prices by an error correction mechanism originating from prevailing mispricing. The speed of price reversal is a natural measure for informational efficiency. The strength of the price reversal relative to the signal-to-noise ratio determines the signs of the return serial correlation and the bias in standard realized variance estimates. We derive the model’s properties and locally estimate it based on mid-quote returns of the NASDAQ 100 constituents. There is evidence of mildly persistent local regimes of positive and negative serial correlation, arising from lagged feedback effects and sluggish price adjustments. The model performance is decidedly superior to existing stylized microstructure models. Finally, we document intraday periodicities in the speed of price reversion and noise-to-signal ratios.
Der urheberrechtlich konnotierte Begriff des Plagiats zählt zu den anerkannten Grundtatbeständen wissenschaftlichen Fehlverhaltens. Der Beitrag zeigt indes, dass das Urheberrecht und das Wissenschaftsrecht keine konzentrischen Kreise bilden, sondern unterschiedliche Zwecke mit je anderen Regelungskonzepten verfolgen. Die Übernahme urheberrechtlicher Argumentationsmuster in die Wissenschaftsethik und das Wissenschaftsrecht erschwert die Herausbildung spezifisch wissenschaftsbezogener Kriterien zur Beurteilung wissenschaftlichen Fehlverhaltens. Als Alternative entwickelt der Beitrag ein Konzept wissenschaftlicher Redlichkeit, das sich am Recht gegen unlauteren Wettbewerb orientiert. Dazu werden weitreichende teleologische und strukturelle Gemeinsamkeiten des Lauterkeitsrechts und der Regeln zu wissenschaftlichem Fehlverhalten aufgedeckt. Insbesondere verfolgen beide Materien eine funktionale Teleologie. Das Lauterkeitsrecht gewährleistet die Funktionsbedingungen des wirtschaftlichen Wettbewerbs, das Verbot wissenschaftlichen Fehlverhaltens sichert die Funktionsbedingungen und damit zugleich den Zielerreichungsgrad des offenen Wissenschaftsprozesses und des Wettbewerbs um wissenschaftliche Reputation.
The bail-in tool as implemented in the European bank resolution framework suffers from severe shortcomings. To some extent, the regulatory framework can remedy the impediments to the desirable incentive effect of private sector involvement (PSI) that emanate from a lack of predictability of outcomes, if it compels banks to issue a sufficiently sized minimum of high-quality, easy to bail-in (subordinated) liabilities. Yet, even the limited improvements any prescription of bail-in capital can offer for PSI’s operational effectiveness seem compromised in important respects.
The main problem, echoing the general concerns voiced against the European bail-in regime, is that the specifications for minimum requirements for own funds and eligible liabilities (MREL) are also highly detailed and discretionary and thus alleviate the predicament of investors in bail-in debt, at best, only insufficiently. Quite importantly, given the character of typical MREL instruments as non-runnable long-term debt, even if investors are able to gauge the relevant risk of PSI in a bank’s failure correctly at the time of purchase, subsequent adjustment of MREL-prescriptions by competent or resolution authorities potentially change the risk profile of the pertinent instruments. Therefore, original pricing decisions may prove inadequate and so may market discipline that follows from them.
The pending European legislation aims at an implementation of the already complex specifications of the Financial Stability Board (FSB) for Total Loss Absorbing Capacity (TLAC) by very detailed and case specific amendments to both the regulatory capital and the resolution regime with an exorbitant emphasis on proportionality and technical fine-tuning. What gets lost in this approach, however, is the key policy objective of enhanced market discipline through predictable PSI: it is hardly conceivable that the pricing of MREL-instruments reflects an accurate risk-assessment of investors because of the many discretionary choices a multitude of agencies are supposed to make and revisit in the administration of the new regime. To prove this conclusion, this chapter looks in more detail at the regulatory objectives of the BRRD’s prescriptions for MREL and their implementation in the prospectively amended European supervisory and resolution framework.
The bail-in tool as implemented in the European bank resolution framework suffers from severe shortcomings. To some extent, the regulatory framework can remedy the impediments to the desirable incentive effect of private sector involvement (PSI) that emanate from a lack of predictability of outcomes, if it compels banks to issue a sufficiently sized minimum of high-quality, easy to bail-in (subordinated) liabilities. Yet, even the limited improvements any prescription of bail-in capital can offer for PSI’s operational effectiveness seem compromised in important respects.
The main problem, echoing the general concerns voiced against the European bail-in regime, is that the specifications for minimum requirements for own funds and eligible liabilities (MREL) are also highly detailed and discretionary and thus alleviate the predicament of investors in bail-in debt, at best, only insufficiently. Quite importantly, given the character of typical MREL instruments as non-runnable long-term debt, even if investors are able to gauge the relevant risk of PSI in a bank’s failure correctly at the time of purchase, subsequent adjustment of MREL-prescriptions by competent or resolution authorities potentially change the risk profile of the pertinent instruments. Therefore, original pricing decisions may prove inadequate and so may market discipline that follows from them.
The pending European legislation aims at an implementation of the already complex specifications of the Financial Stability Board (FSB) for Total Loss Absorbing Capacity (TLAC) by very detailed and case specific amendments to both the regulatory capital and the resolution regime with an exorbitant emphasis on proportionality and technical fine-tuning. What gets lost in this approach, however, is the key policy objective of enhanced market discipline through predictable PSI: it is hardly conceivable that the pricing of MREL-instruments reflects an accurate risk-assessment of investors because of the many discretionary choices a multitude of agencies are supposed to make and revisit in the administration of the new regime. To prove this conclusion, this chapter looks in more detail at the regulatory objectives of the BRRD’s prescriptions for MREL and their implementation in the prospectively amended European supervisory and resolution framework.
We test two hypotheses, based on sexual selection theory, about gender differences in costly social interactions. Differential selectivity states that women invest less than men in interactions with new individuals. Differential opportunism states that women’s investment in social interactions is less responsive to information about the interaction’s payoffs. The hypotheses imply that women’s social networks are more stable and path dependent and composed of a greater proportion of strong relative to weak links. During their introductory week, we let new university students play an experimental trust game, first with one anonymous partner, then with the same and a new partner. Consistent with our hypotheses, we find that women invest less than men in new partners and that their investments are only half as responsive to information about the likely returns to the investment. Moreover, subsequent formation of students’ real social networks is consistent with the experimental results: being randomly assigned to the same introductory group has a much larger positive effect on women’s likelihood of reporting a subsequent friendship.
Der Beitrag arbeitet die moralische Subjektivierungsform ökonomischer Verschuldung heraus. In Auseinandersetzung mit Friedrich Nietzsche, Max Weber und Pierre Bourdieu wird argumentiert, dass die Form der Verschuldung durch eine spezifische Zeitlichkeit geprägt ist. Die zentrale These lautet, dass sich das Zeitregime von Schuld und Schulden als paradox erweist: Einerseits ermöglicht die moderne "Entzauberung der Welt" (Max Weber) eine Öffnung auf gesellschaftliche Zukünfte hin und diese temporale Öffnung bildet auch eine notwendige Bedingung kapitalistischer Investitionstätigkeiten. Andererseits verstellt das gegenwärtige rigide Zeitregime der Schuld(en) jedoch die Möglichkeit subjektiver und politischer neuer Anfänge in der Zeit, da die Verschuldung eine Dynamik der ökonomischen Determinierung gegenwärtiger Handlungsoptionen durch den Zwang zur Rückzahlung ins Werk setzt.
Rechtspopulistische Bewegungen machen sich zur Zeit in vielen westlichen Staaten zum Sprachrohr angeblich bisher unterdrückter Bevölkerungsgruppen und Meinungen. Die identitäre Bewegung entwickelt diesen Ansatz weiter zu einem Projekt der autoritären Staatlichkeit gegen Multikulturalismus, Islam und Einwanderung. Dabei verbindet sie ihre Kampagne für einen ethnisch geschlossen Nationalstaat mit der Kritik an der kapitalistischen Globalisierung. Mit einem Sprachduktus, der Politik emotionalisiert, wird durch «geistige Verschärfung» das Programm eines defensiven Ethnonationalismus entfaltet. Dieser beruft sich auf Traditionsbestandteile eines völkischen Antimodernismus und eine von dem russischen Philosophen Alexander Dugin entworfene eurasische Geopolitik.
Ein europäischer Keynesianismus als Grundlage für ein gesamteuropäisches Wirtschaftskonzept würde als offensive Gegenstrategie die Idee einer sozialstaatlichen Erneuerung propagieren können. Zudem sind Akteure aus der Zivilgesellschaft aufgefordert, gegen Fremdenfeindlichkeit und Orientierungsverlust aufklärerisch zu wirken.