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4 June 2013 marked the formal launch of the third generation of the Equator Principles (EP III) and the tenth anniversary of the EPs – enough reasons for evaluating the EPs initiative from an economic ethics and business ethics perspective. This chapter deals with the following questions: What has been achieved so far by the EPs? Which reform steps need to be adopted to further strengthen the EPs framework? Can the EPs be regarded as a role model in the field of sustainable finance and CSR? The first part explains the term EPs and introduces the keywords related to the EPs framework. The second part summarises the main characteristics of the newly-released third generation of the EPs. The third part critically evaluates EP III from an economic ethical and business ethics perspective. The chapter concludes with a summary of the main findings.
Variations and disparities between von Hayek and Ordoliberalism can be detected on diverse levels: 1. philosophy of science; 2. setting dissimilar priorities; 3. social philosophy; 4. genesis of norms; and, 5. notion of freedom. Therefore, it is possible to make an important distinction within neoliberalism itself, which contains at least two factions: von Hayek’s evolutionary liberalism, and German Ordoliberalism. The following essay not only takes the neoliberal separation of different varieties as granted; it proceeds further. It focuses on the topic of justice and elaborates the (slightly) differing conceptions of justice within neoliberalism. Thus, the specific contribution of the paper is that it adds a sixth dimension of differences (which is highly interconnected with the differing conceptions of genesis of norms). In this paper, I emphasize the (often neglected) subtle differences between von Hayek, Eucken, Röpke, and Rüstow, with special emphasis on their theories of justice. In this regard, I focus not only on Eucken and von Hayek; in addition, I include the concepts of justice developed by Rüstow and Röpke, as well, and, in consequence, broaden the perspective incorporating Eucken as a member of the Freiburg School of Law and Economics, and Rüstow and Röpke as representatives of Ordoliberalism in the wider sense. The paper tackles these topics in three steps. After briefly examining and discussing the existing literature and providing a literature overview on the decade-long debate on von Hayek and Ordoliberalism, I then describe von Hayek’s conception of commutative justice; particularly, justice of rules and procedures (rather than end-state justice). Then, I examine Eucken’s, Rüstow’s, and Röpke’s theories of justice, which consist of a mixture of commutative and distributive justice. Then, I draw a comparison between the ideas of justice developed by Eucken, Röpke, Rüstow, and von Hayek. The essay ends with a summary of my main findings.
Im Mittelpunkt des Gutachtens stehen die anthropologischen Grundlagen, das wirtschaftsethische Fundament und das Menschenbild der Sozialen Marktwirtschaft. Die Leitlinien des Wittenberg-Prozesses der Chemie-Sozialpartner dienen dabei als argumentative Grundstruktur. Ziel der Arbeit ist es, aufzuzeigen, dass die CSSA und der Wittenberg-Prozess auf den normativen und wirtschaftsethischen Prämissen der (originären) Sozialen Marktwirtschaft ruhen und die Sozialpartnerschaft der chemischen Industrie ein wichtiger Baustein ist auf dem Weg hin zu einer Neubegründung und Renaissance der Sozialen Marktwirtschaft vor dem Hintergrund der Globalisierung. Folgende Hypothesen sollen dabei eingehender untersucht werden: 1. Fundamental für die Wirtschaftsethik der Sozialen Marktwirtschaft ist die Unterscheidung von Individual, Unternehmens-und Ordnungsethik. 2. Das Freiheitsverständnis der Sozialen Marktwirtschaft enthält sowohl negative (im Sinne der Abwesenheit von Willkür und Zwang) als auch positive Momente (im Sinne von rationaler Selbstbestimmung und kantischer Autonomie). Darüber hinaus inkorporiert es die aus der Konstitutionenökonomik bekannten Prinzipien der Diskriminierungs und Privilegienfreiheit. 3. Das Gerechtigkeitsverständnis der Sozialen Marktwirtschaft ist synkretistisch und eklektisch; es verbindet kommutative mit distributiven Gerechtigkeitselementen. 4. Der Homo oeconomicus ist kein(!) Bestandteil der Wirtschaftsethik der Sozialen Marktwirtschaft. Diese weist vielmehr Parallelen zur Heuristik der Kulturellen Ökonomik – dem sogenannten Homo culturalis – auf. 5. Eine bedeutende Funktion innerhalb der Sozialen Marktwirtschaft kommt der Sozialpartnerschaft zu. Diese leistet einen wichtigen Beitrag zur Stärkung der sozioökonomischen Teilhabe und Inklusion auf der unternehmensethischen Ebene.
Freiburg School of Law and Economics, Freiburg (Lehrstuhl-)Tradition and the Genesis of Norms
(2014)
The paper analyzes the parallels and differences between the Freiburg School of Law and Economics represented by the works of Eucken (and Röpke) and the Freiburg (Lehrstuhl-)Tradition represented by the works of Hayek and Vanberg. The parallels are illustrated by making use of the constitutional economics concepts Ordnungspolitik (i.e., order of rules/choices over rules) as well as freedom of privileges and discrimination. The differences, which have received surprisingly little attention, include the following aspects: 1. philosophy of science and epistemology, 2. genesis of norms, and 3. political philosophy. The paper tackles these issues in three steps. The second chapter presents Vanberg’s constitutional economics theory with special emphasis on the concepts of citizen sovereignty and normative individualism. The third chapter reviews the ordoliberal concepts of science and the state which are – to a certain degree – elitist and expertocratic, that is, they rely to a considerable degree on intellectual experts (in particular, scientists) being part of the societal elite. The fourth chapter differentiates two kinds of genesis of norms: an evolutionary one and an elitist-expertocratic one allowing for a differentiation between Eucken’s and Röpke’s Ordoliberalism on the on the hand and Vanberg’s Hayekian -- and Buchanan-style constitutional economics approach on the other hand. The paper ends with a summary of the main findings.
SAFE Newsletter : 2014, Q1
(2014)
SAFE Newsletter : 2013, Q4
(2013)
In this paper, we study the effect of proportional transaction costs on consumption-portfolio decisions and asset prices in a dynamic general equilibrium economy with a financial market that has a single-period bond and two risky stocks, one of which incurs the transaction cost. Our model has multiple investors with stochastic labor income, heterogeneous beliefs, and heterogeneous Epstein-Zin-Weil utility functions. The transaction cost gives rise to endogenous variations in liquidity. We show how equilibrium in this incomplete-markets economy can be characterized and solved for in a recursive fashion. We have three main findings. One, costs for trading a stock lead to a substantial reduction in the trading volume of that stock, but have only a small effect on the trading volume of the other stock and the bond. Two, even in the presence of stochastic labor income and heterogeneous beliefs, transaction costs have only a small effect on the consumption decisions of investors, and hence, on equity risk premia and the liquidity premium. Three, the effects of transaction costs on quantities such as the liquidity premium are overestimated in partial equilibrium relative to general equilibrium.
This paper studies the life cycle consumption-investment-insurance problem of a family. The wage earner faces the risk of a health shock that significantly increases his probability of dying. The family can buy term life insurance with realistic features. In particular, the available contracts are long term so that decisions are sticky and can only be revised at significant costs. Furthermore, a revision is only possible as long as the insured person is healthy. A second important and realistic feature of our model is that the labor income of
the wage earner is unspanned. We document that the combination of unspanned labor income and the stickiness of insurance decisions reduces the insurance demand significantly. This is because an income shock induces the need to reduce the insurance coverage, since premia become less affordable. Since such a reduction is costly and families anticipate these potential costs, they buy less protection at all ages. In particular, young families stay away from life insurance markets altogether.
Banks' financial distress, lending supply and consumption expenditure : [version december 2013]
(2014)
The paper employs a unique identification strategy that links survey data on household consumption expenditure to bank level data in order to estimate the effects of bank financial distress on consumer credit and consumption expenditures. Specifically, we show that households whose banks were more exposed to funding shocks report significantly lower levels of non-mortgage liabilities compared to a matched sample of households. The reduced access to credit, however, does not result in lower levels of consumption. Instead, we show that households compensate by drawing down liquid assets. Only households without the ability to draw on liquid assets reduce consumption. The results are consistent with consumption smoothing in the face of a temporary adverse lending supply shock. The results contrast with recent evidence on the real effects of finance on firms' investment, where even temporary adverse credit supply shocks are associated with significant real effects.
This paper tests whether an increase in insured deposits causes banks to become more risky. We use variation introduced by the U.S. Emergency Economic Stabilization Act in October 2008, which increased the deposit insurance coverage from $100,000 to $250,000 per depositor and bank. For some banks, the amount of insured deposits increased significantly; for others, it was a minor change. Our analysis shows that the more affected banks increase their investments in risky commercial real estate loans and become more risky relative to unaffected banks following the change. This effect is most distinct for affected banks that are low capitalized.
We introduce a new measure of systemic risk, the change in the conditional joint probability of default, which assesses the effects of the interdependence in the financial system on the general default risk of sovereign debtors. We apply our measure to examine the fragility of the European financial system during the ongoing sovereign debt crisis. Our analysis documents an increase in systemic risk contributions in the euro area during the post-Lehman global recession and especially after the beginning of the euro area sovereign debt crisis. We also find a considerable potential for cascade effects from small to large euro area sovereigns. When we investigate the effect of sovereign default on the European Union banking system, we find that bigger banks, banks with riskier activities, with poor asset quality, and funding and liquidity constraints tend to be more vulnerable to a sovereign default. Surprisingly, an increase in leverage does not seem to influence systemic vulnerability.
We show that market discipline, defined as the extent to which firm specific risk characteristics are reflected in market prices, eroded during the recent financial crisis in 2008. We design a novel test of changes in market discipline based on the relation between firm specific risk characteristics and debt-to-equity hedge ratios. We find that market discipline already weakened after the rescue of Bear Stearns before disappearing almost entirely after the failure of Lehman Brothers. The effect is stronger for investment banks and large financial institutions, while there is no comparable effect for non-financial firms.
We analyze the equilibrium in a two-tree (sector) economy with two regimes. The output of each tree is driven by a jump-diffusion process, and a downward jump in one sector of the economy can (but need not) trigger a shift to a regime where the likelihood of future jumps is generally higher. Furthermore, the true regime is unobservable, so that the representative Epstein-Zin investor has to extract the probability of being in a certain regime from the data. These two channels help us to match the stylized facts of countercyclical and excessive return volatilities and correlations between sectors. Moreover, the model reproduces the predictability of stock returns in the data without generating consumption growth predictability. The uncertainty about the state also reduces the slope of the term structure of equity. We document that heterogeneity between the two sectors with respect to shock propagation risk can lead to highly persistent aggregate price-dividend ratios. Finally, the possibility of jumps in one sector triggering higher overall jump probabilities boosts jump risk premia while uncertainty about the regime is the reason for sizeable diffusive risk premia.
Advances in technology and several regulatory initiatives have led to the emergence of a competitive but fragmented equity trading landscape in the US and Europe. While these changes have brought about several benefits like reduced transaction costs, regulators and market participants have also raised concerns about the potential adverse effects associated with increased execution complexity and the impact on market quality of new types of venues like dark pools. In this article we review the theoretical and empirical literature examining the economic arguments and motivations underlying market fragmentation, as well as the resulting implications for investors' welfare. We start with the literature that views exchanges as natural monopolies due to presence of network externalities, and then examine studies which challenge this view by focusing on trader heterogeneity and other aspects of the microstructure of equity markets.
We present a thought-provoking study of two monetary models: the cash-in-advance and the Lagos and Wright (2005) models. We report that the different approach to modeling money — reduced-form vs. explicit role — neither induces theoretical nor quantitative differences in results. Given conformity of preferences, technologies and shocks, both models reduce to one difference equation. The equations do not coincide only if price distortions are differentially imposed across models. To illustrate, when cash prices are equally distorted in both models equally large welfare costs of inflation are obtained in each model. Our insight is that if results differ, then this is due to differential assumptions about the pricing mechanism that governs cash transactions, not the explicit microfoundation of money.
This paper summarizes the key proposals of the report by the Liikanen Commission. It starts with an explanation of a crisis narrative underlying the Report and its proposals. The proposals aim for a revitalization of market discipline in financial markets. The two main structural proposals of the Liikanen Report are: first, for large banks, the separation of the trading business from other parts of the banking business (the "Separation Proposal"), and the mandatory issuing of subordinated bank debt thought to be liable (the strict "Bail-in Proposal"). The credibility of this commitment to private liability is achieved by strict holding restrictions. The anticipated consequences of the introduction of these structural regulations for the financial industry and markets are addressed in a concluding part.
Ausgehend von einer Erläuterung der Kriseninterpretation (crisis narrative), wie sie in dem Bericht der Liikanen-Kommission zugrunde liegt, werden die nach Ansicht des Verfassers zentralen Vorschläge des Kommissionsberichts ausgewählt, vorgestellt und in den größeren Rahmen einer erneuerten Ordnungspolitik für die Finanzmärkte Europas eingeordnet. Die mit den Vorschlägen eng zusammenhängenden Reformelemente der Bankenunion werden in diesem Text bewusst ausgeklammert. Die beiden zentralen Strukturvorschläge des Liikanen-Berichts betreffen die Abspaltung der Handelsgeschäfte von dem Universalbankengeschäft für große, internationale Banken (der Trennbankenvorschlag), sowie die verpflichtende Emission nachrangigen, glaubwürdig haftenden Fremdkapitals (der strenge Bail-in Vorschlag). Glaubwürdigkeit der Haftungszusage wird durch strenge Halterestriktionen erreicht. Vorhersehbare Folgerungen einer Einführung dieser Strukturregeln für die Finanzindustrie und -märkte werden in einem abschließenden Teil angesprochen.
The financial crisis which started in 2007 has caused a tremendous challenge for monetary policy. The simple concept of inflation targeting has lost its position as state of the art. There is a debate on whether the mandate of a central bank should not be widened. And, indeed, monetary policy has been very accommodative in the last couple of years and central banks have modified their communication strategies by introducing forward guidance as a new policy tool. This paper addresses the consequences of these developments for the credibility, the reputation and the independence of central banks. It also comments on the recent debate among economists concerning the question whether the ECB's OMT program is compatible with its mandate.
Um den Teufelskreis sich wechselseitig verstärkender Banken- und Staatsschuldenkrisen zu durchbrechen, haben sich die europäischen Institutionen grundsätzlich dazu bekannt, eine Bankenunion zu schaffen. Der Dreh- und Angelpunkt der verfolgten Strategie liegt dabei darin, durch die Schaffung zentraler, d.h. supranationaler Auffangmechanismen die Ausfallrisiken von Banken und Staaten nachhaltig zu entkoppeln. Dabei ist zu beachten, dass gerade auch die einzelnen Elemente des institutionellen Reformpakets in ihrer Binnenstruktur so beschaffen sein müssen, dass vorhersehbare Ineffizienzen nicht dazu führen, dass Vorteile der Supranationalisierung aufgehoben oder gar in ihr Gegenteil verkehrt werden. Der vorliegende Beitrag diskutiert den Verordnungsentwurf der EU Kommission für einen Single Resolution Mechanism (SRM) vor dem Hintergrund dieser Forderung.
In der vierten Veranstaltung der „Gesprächsreihe zu Strukturreformen im europäischen Bankensek-tor“ diskutierte Dr. Elke König, Präsidentin der Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin), die Wiederherstellung privater Haftung und die zukünftige Rolle der Aufsicht, insbesondere im Hinblick auf die Vorschläge der Liikanen-Kommission.
König warnte, dass man systemische Risiken, die vor allem während der Finanzkrise zu Problemen geführt hätten, noch nicht im Griff habe. Sowohl die Bankenaufsicht als auch die Wissenschaft suche immer noch nach einer geeigneten Lösung dieses Problems. Systemische Risiken führen dazu, dass komplexe und stark vernetzte Institute von Staaten gestützt werden, wenn diese ins Straucheln gera-ten. In der Finanzkrise hatte dies zur Folge, dass Banken letztlich vom Steuerzahler gerettet wurden. Diesen Quasi-Insolvenzschutz systemrelevanter Institute müsse man aufheben, um Fehlanreize im Markt zu korrigieren, so König. Verantwortung und Haftung für unternehmerisches Handeln müssten wieder in einer Hand liegen, und zwar in der der Institute, seiner Eigner und Gläubiger.
König ist deshalb der Meinung, dass ein einheitlicher Abwicklungsmechanismus für Banken notwen-dig sei, der auch grenzüberschreitend wirke. Als einen wichtigen Bestandteil dieses Mechanismus nannte sie die Umsetzung eines breiten Bail-ins. Durch Bail-in werden Eigentümer und Gläubiger von Bankinstituten an einer Restrukturierung beteiligt. Eine Umwandlung von Fremdkapital in Eigenkapi-tal kann darüber hinaus dazu dienen, ein Brückeninstitut mit Kapital auszustatten.
Zur konkreten Ausgestaltung von Bail-in-Instrumenten gibt es unterschiedliche Ansätze: Die Liikanen-Kommission plädierte in ihrem Vorschlag für eine Schaffung konkreter Bail-in-Anleihen, vergleichbar mit den Contingent Convertible Bonds (CoCo-Bonds), die in der Schweiz bereits eingeführt wurden. Die BaFin setze dagegen, ähnlich wie die Europäische Kommission, auf einen möglichst breiten An-satz und habe sich gegen die Emission einer neuen Gattung vertraglicher Bail-in-Instrumente ausge-sprochen, sagte König. Die Höhe der bail-in-fähigen Instrumente sowie die Reihenfolge der Haftung müssten aber trotzdem für jedes Institut klar definiert sein.
König betonte, dass es wichtig sei, nun die institutsspezifischen Sanierungs- und Abwicklungspläne zu entwickeln. Die BaFin habe mit der Erstellung der Abwicklungspläne auch schon begonnen. Bail-in sei dabei nur ein Baustein in dem wesentlich umfangreicheren Instrumentenkasten der Sanierungs- und Abwicklungspläne.
In der anschließenden Diskussion sagte König, dass es eine Abwicklungsbehörde für Institute, die in Zukunft einer europäischen Aufsicht unterliegen, derzeit nur auf nationaler Ebene geben könne. An-dernfalls sei eine Änderung der europäischen Verträge notwendig, da die Mittel, die für eine Abwick-lung aufgewendet werden müssten, aus nationalen Haushalten kämen. Bei einer Abwicklungsbehör-de auf europäischer Ebene würden die Haushaltsbelastung und die Entscheidung über die Verwen-dung der Mittel auseinanderfallen.
Essays in behavioral economics - evidence on self-selection into jobs, social networks and leniency
(2013)
Die Dissertation mit dem Titel „Essays in Behavioral Economics – Evidence on Self-Selection into Jobs, Social Networks and Leniency“ besteht aus einer Sammlung von vier wissenschaftlichen Abhandlungen. Alle Arbeiten verbindet die Analyse von theoretischen Konzepten und Erkenntnissen der Verhaltensökonomie unter Verwendung der experimentellen Methode. Die erste wissenschaftliche Abhandlung trägt den Titel „Sorting of Motivated Agents - Empirical Evidence on Self-Selection into the German Police“ und untersucht Selbstselektion bestimmter Individuen in den Polizeiberuf. Die experimentelle Studie untersucht die Frage, ob Polizeibewerber sich hinsichtlich ihrer Präferenzen in Bezug auf ihr Normdurchsetzungsverhalten in den Polizeiberuf selektieren. Die zweite Abhandlung greift diese Erkenntnisse auf und untersucht Polizeianwärter in ihrer Berufsausbildung ebenfalls hinsichtlich ihrer Normdurchsetzungsbereitschaft. Die Arbeit trägt den Titel „Selection and formation of motivated agents -- empirical evidence from the German Police”. In der dritten wissenschaftlichen Abhandlung werden geschlechterspezifische Unterschiede bei der Wahl von Partnern und dem Aufbau des sozialen Netzwerkes untersucht. Diese trägt den Titel „Selectivity and opportunism: two dimensions of gender differences in trust games and network formation“ und wurde zusammen mit Guido Friebel, Marie Lalanne, Paul Seabright und Peter Schwardmann verfasst. Die vierte Abhandlung geht einer aktuellen Fragestellung der Industrieökonomie nach und trägt den Titel „Antitrust, auditing and leniency programs: evidence from the laboratory“, verfasst mit Mehdi Feizi and Ali Mazyaki. In ihrer Gesamtheit liefert meine Dissertation Antworten auf personalpolitische, soziale und industrieökonomische Fragestellungen.
SAFE Newsletter : 2013, Q3
(2013)
Research: Joachim Weber, Benjamin Loos, Steffen Meyer, Andreas Hackethal "Individual Investors' Trading Motives and Security Selling Behavior"
Ignazio Angeloni, Ester Faia "Monetary Policy and Prudential Regulations with Bank Runs"
Helmut Siekmann "Legal Limits to Quantitative Easing"
Policy Margit Vanberg "SAFE Summer Academy 2013 on 'International Financial Stability'"
Guest Commentary Peter Praet "Cooperation between the ECB and Academia"
Monetary theorists have advanced an intriguing notion: we exchange money to make up for a lack of enforcement, when it is difficult to monitor and sanction opportunistic behaviors. We demonstrate that, in fact, monetary equilibrium cannot generally be sustained when monitoring and punishment limitations preclude enforcement — external or not. Simply put, monetary systems cannot operate independently of institutions — formal or informal — designed to monitor behaviors and sanction undesirable ones. This fundamental result is derived by integrating monetary theory with the theory of repeated games, studying monetary equilibrium as the outcome of a matching game with private monitoring.
In the aftermath of the financial crisis, the ECB has experienced an unprecedented deterioration in the level of trust. This raises the question as to what factors determine trust in central banking. We use a unique cross-country dataset which includes a rich set of socio-economic characteristics and supplement it with variables meant to reflect a country’s macroeconomic condition. We find that besides individual socio-economic characteristics, macroeconomic conditions play a crucial role in the trust-building process. Our results suggest that agents are boundedly rational in the trust-building process and that current ECB market operations may even be beneficial for trust in the ECB in the long-run.
We examine whether the robustifying nature of Taylor rule cross-checking under model uncertainty carries over to the case of parameter uncertainty. Adjusting monetary policy based on this kind of cross-checking can improve the outcome for the monetary authority. This, however, crucially depends on the relative welfare weight that is attached to the output gap and also the degree of monetary policy commitment. We find that Taylor rule cross-checking is on average able to improve losses when the monetary authority only moderately cares about output stabilization and when policy is set in a discretionary way.
How does the need to preserve government debt sustainability affect the optimal monetary and fiscal policy response to a liquidity trap? To provide an answer, we employ a small stochastic New Keynesian model with a zero bound on nominal interest rates and characterize optimal time-consistent stabilization policies. We focus on two policy tools, the short-term nominal interest rate and debt-financed government spending. The optimal policy response to a liquidity trap critically depends on the prevailing debt burden. While the optimal amount of government spending is decreasing in the level of outstanding government debt, future monetary policy is becoming more accommodative, triggering a change in private sector expectations that helps to dampen the fall in output and inflation at the outset of the liquidity trap.
This paper analyzes the evolving architecture for the prudential supervision of banks in the euro area. It is primarily concerned with the likely effectiveness of the SSM as a regime that intends to bolster financial stability in the steady state. By using insights from the political economy of bureaucracy it finds that the SSM is overly focused on sharp tools to discipline captured national supervisors and thus underincentives their top-level personnel to voluntarily contribute to rigid supervision. The success of the SSM in this regard will hinge on establishing a common supervisory culture that provides positive incentives for national supervisors. In this regard, the internal decision making structure of the ECB in supervisory matters provides some integrative elements. Yet, the complex procedures also impede swift decision making and do not solve the problem adequately. Ultimately, a careful design and animation of the ECB-defined supervisory framework and the development of inter-agency career opportunities will be critical.
The ECB will become a de facto standard setter that competes with the EBA. A likely standoff in the EBA’s Board of Supervisors will lead to a growing gap in regulatory integration between SSM-participants and other EU Member States.
Joining the SSM as a non-euro area Member State is unattractive because the current legal framework grants no voting rights in the ECB’s ultimate decision making body. It also does not supply a credible commitment opportunity for Member States who seek to bond to high quality supervision.
On July 4, 2013 the ECB Governing Council provided more specific forward guidance than in the past by stating that it expects ECB interest rates to remain at present or lower levels for an extended period of time. As explained by ECB President Mario Draghi this expectation is based on the Council’s medium-term outlook for inflation conditional on economic activity and money and credit. Draghi also stressed that there is no precise deadline for this extended period of time, but that a reasonable period can be estimated by extracting a reaction function. In this note, we use such a reaction function, namely the interest rate rule from Orphanides and Wieland (2013) that matches past ECB interest rate decisions quite well, to project the rate path consistent with inflation and growth forecasts from the survey of professional forecasters published by the ECB on August 8, 2013. This evaluation suggests an increase in ECB interest rates by May 2014 at the latest. We also use the Eurosystem staff projection from June 6, 2013 for comparison. While it would imply a longer period of low rates, it does not match past ECB decisions as well as the reaction function with SPF forecasts.
This note reviews the legal issues and concerns that are likely to play an important role in the ongoing deliberations of the Federal Constitutional Court of Germany concerning the legality of ECB government bond purchases such as those conducted in the context of its earlier Securities Market Programme or potential future Outright Monetary Transactions.
Der vorliegende Beitrag zeigt auf, dass die zunehmende Komplexität der Aufgaben von Zentralbanken zu einer strukturellen Überforderung führen kann. Aufgrund der funktionellen Komplexität einer makroprudenziellen Prozesspolitik auf der Ziel- und Instrumentenebene sollte eher nach einer Reduktion als nach einer Ausweitung des makroprudenziellen Werkzeugkastens Ausschau gehalten werden. Weiterhin steht die sich derzeit teilweise noch vergrößernde institutionelle Komplexität der makroprudenziellen Politik ihrer funktionellen Komplexität um nichts nach. Bei entsprechenden Vorkehrungen können die bereits eingetretenen und die potenziellen Überforderungen jedoch zumindest teilweise in verkraftbare Herausforderungen überführt werden. Der Aufsatz schließt mit Empfehlungen für entsprechende Maßnahmen.
The German corporate governance code includes a recommendation as to diversity on corporate boards. Two draft bills on gender quotas are currently under way in legislative proceedings. However, the ruling coalition rejects those, advocating a “flexible quota”. The present study provides an overview on legislative proposals currently presented and on academic scholarship on the issue. Legal obstacles to the introduction of a “fix” quota under German law are discussed and the “soft” version of “flexible” quotas is advocated.
Until about 25 years ago, almost all European countries had a so-called “three pillar” banking system comprising private banks, (public) savings banks and (mutual) cooperative banks. Since that time, several European countries have implemented far-reaching changes in their banking systems, which have more than anything else affected the two “pillars” of the savings and cooperative banks. The article describes the most important changes in Germany, Austria, France, Italy and Spain and characterizes the former and the current roles of savings banks and cooperative banks in these countries. A particular focus is placed on the German case, which is almost unique in so far as the German savings banks and cooperative banks have maintained most of their traditional features. The article concludes with a plea for diversity of institutional forms of banks and argues that it is important to safeguard the strengths of those types of banks that do not conform to the model of a large shareholder-oriented commercial bank.
Notenbanken haben heute nicht die Aufgabe die Geldmenge zu kontrollieren. Ihr Job ist es, den Wert des Geldes – und damit den Preis der Wirtschaftsgüter in der jeweiligen Währung – zu stabilisieren. Doch wie ist diese Preisstabilität am besten herzustellen? Muß man dabei nicht doch die Geldmenge im Auge behalten? Unter monetären Ökonomen gibt es dazu eine wissenschaftliche Debatte.
The latest appointment to the ECB's Executive Board initiated a political dispute between the European Parliament and the Euro Group on the question of representation of females on the Executive Board and the Governing Council of the ECB. The dispute has raised awareness to the fact that a culture of equality and equal opportunity should be built from the ground up. A long term plan helping talented women to emerge and be prepared to take increasing responsibilities is necessary to make sure that there is a growing pool of qualified female candidates.
This present comment suggests an amendment to the proposal for a directive of the European Parliament and of the Council, establishing a framework for the recovery and resolution of credit institutions and investment firms. The current proposal focuses on bail-in, but does not sufficiently take into account the pressure exerted on central bankers, supervisors and politicians by the fear of interbank contagion. The only way out of this hold-up type of situation can be found in bail-in bonds. Bail-in bonds are dedicated loss taking debt instruments, whose status of being first in line if it comes to default is clearly communicated from day one.
There is a prevalent view outside Greece that promotion of competitiveness is tantamount with price reductions for Greek goods and services. Massive horizontal salary cuts appear, at first, to promote competitiveness by reducing unit labor costs and to reduce fiscal deficits by reducing the wage bill of the public sector. Upon closer look, however, horizontal salary cuts have been much greater than needed for Greek competitiveness, providing an alibi vis a vis the Troika for reforms that are still to be implemented, but at the same time undermining both competitiveness and the potential to reduce public debt through sustainable development.
In den vergangenen Jahrzehnten wurden hohe Garantieverzinsungen in den Lebensversicherungsverträgen vereinbart. Dauert die herrschende Niedrigzinsphase noch einige Jahre an, wird es für einige Lebensversicherungsunternehmen schwierig werden, die gegebenen Langzeitgarantien über ihre Kapitalanlage zu erwirtschaften. Der Gesetzgeber sollte festlegen, dass Versicherungskunden nur an Bewertungsreserven beteiligt werden, die eine Höhe übersteigen, die zur Gewährleistung eines intergenerativen Risikoausgleichs notwendig ist. Weiterhin sollten Versicherungskunden nur an Bewertungsreserven beteiligt werden, die aus Kapitalanlagen entstehen, die nicht festverzinsliche Wertpapiere umfassen.
Am 6. Februar 2013 hat die Bundesregierung den "Entwurf eines Gesetzes zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen” veröffentlicht. Artikel 2 des Gesetzesentwurfs sieht vor bei systemrelevanten Finanzinstitutionen das Einlagen- und Kreditgeschäft vom Handelsgeschäft abzutrennen. Die Zielsetzung des Gesetzentwurfs, Kapitalkosten wieder in direkte Abhängigkeit des Risikos von Geschäftsfeldern zu setzen und eine Abwicklung zu erleichtern, die ohne den Einsatz von Steuermitteln gelingen kann, ist begrüßenswert. In seiner derzeitigen Ausgestaltung läuft der Gesetzesentwurf jedoch Gefahr, zwar symbolträchtig zu sein, aber in der Zielerreichung hinsichtlich Stabilität des Finanzmarktes und Schutz von Einlegern und Steuerzahlern hinter den Erwartungen zurückzubleiben.
Die Stellungnahme bezieht sich auf die aktuellen Formulierungsvorschläge für Änderungen am DCGK für börsennotierte deutsche Aktiengesellschaften aus den Plenarsitzungen der Regierungskommission vom 9. Januar und 31. Januar 2013. Der Text enthält zudem Anmerkungen zur Aufsichtsratvergütung, zur Besetzung des Prüfungsausschusses mit Financial Experts, zu Fragen der Mitbestimmung und zu Möglichkeiten der Bündelung der Corporate Governance Berichterstattung.
Gesprächsreihe zu Strukturreformen im Europäischen Bankensektor: Managementvergütung im Bankensektor
(2013)
In der ersten Veranstaltung der „Gesprächsreihe zu Strukturreformen im europäischen Bankensektor“ diskutierten Professor Dr. Jan Krahnen und Dr. Thomas Mayer den im Liikanen-Bericht enthaltenen Vorschlag zur Managervergütung im Bankensektor. Der Vorschlag baut auf einem der Kernvorschläge der Liikanen-Kommission auf, nach dem Finanzinstitute gehalten sein sollen, einen Teil ihres Fremdkapitals so zu strukturieren, dass, bei Schieflage des Finanzinstituts, eine Inhaftungnahme der Gläubiger dieses Fremdkapitals möglich wird. Um dies zu erreichen, empfiehlt die Liikanen-Kommission für alle Banken, dass diese einen festgelegten Prozentsatz ihres Kapitals als „Bail-in Anleihen“ begeben müssen. Der Vorschlag zur Managervergütung sieht vor Bail-in Anleihen für die leistungsorientierte und anreizorientierte Entlohnung von Managern einzusetzen, um Anreize zu geben, die Risikopolitik des Unternehmens so zu verankern, dass auch längerfristig keine exorbitanten Risiken auftreten.
What happened in Cyprus
(2013)
This policy letter sheds light on the economic and political backround in Cyprus and provides an analyses of the factors which lead to an intensification of the crisis there. It discusses the severe consequences of the errors made in the recent establishment of an adjustment program for Cyprus by the Europroup for European economic management as a whole.