Sustainable Architecture for Finance in Europe (SAFE)
Refine
Year of publication
Document Type
- Working Paper (49)
- Article (12)
- Review (1)
Has Fulltext
- yes (62)
Is part of the Bibliography
- no (62)
Keywords
- Coronavirus (5)
- Financial Regulation (3)
- banks (3)
- institutions (3)
- prudential supervision (3)
- regulatory arbitrage (3)
- shadow banking (3)
- Antitrust (2)
- COVID-19 (2)
- Consumer Welfare (2)
Institute
- Rechtswissenschaft (62) (remove)
Nicht nur die Geräuschkulisse des Brexits absorbierte ein Stück weit die Aufmerksamkeit für das Urteil des Europäischen Gerichtshofs (EuGH) zur Zulässigkeit des Anleihenkaufprogramms der EZB. Denn immerhin entschied Luxemburg damit über eine der nach wie vor seltenen Vorlagen aus Karlsruhe. Dazu mag auch beigetragen haben, dass seit der Stellungnahme des Generalanwalts Wathelet nicht mehr damit gerechnet wurde, dass der EuGH der Europäischen Zentralbank (EZB) einen sprichwörtlichen Strich durch die Rechnung machen würde. Dennoch ist das Urteil aus einigen Gründen bemerkenswert.
Do current levels of bank capital in Europe suffice to support a swift recovery from the COVID-19 crisis? Recent research shows that a well-capitalized banking sector is a major factor driving the speed and breadth of recoveries from economic downturns. In particular, loan supply is negatively affected by low levels of capital. We estimate a capital shortfall in European banks of up to 600 billion euro in a severe scenario, and around 143 billion euro in a moderate scenario. We propose a precautionary recapitalization on the European level that puts the European Stability Mechanism (ESM) center stage. This proposal would cut through the sovereign-bank nexus, safeguard financial stability, and position the Eurozone for a quick recovery from the pandemic.
Since the 2008 financial crisis, European largest banks’ size and business models have largely remained unchallenged. Is that because of banks’ continued structural power over States? This paper challenges the view that States are sheer hostages of banks’ capacity to provide credit to the real economy – which is the conventional definition of structural power. Instead, it sheds light on the geo-economic dimension of banks’ power: key public officials conceive the position of “their own” market-based banks in global financial markets as a crucial dimension of State power. State priority towards banking thus result from political choices over what structurally matters the most for the State. Based on a discourse analysis of parliamentary debates in France, Germany and Spain between 2010 and 2020 as well as on a comparative analysis of the implementation of a special tax on banks in the early 2010s, this paper shows that State’s Finance ministries tend to prioritize geo-economic considerations over credit to firms. By contrast, Parliaments tend to prioritize investment. Power dynamics within the State thus largely shape political priorities towards banking at the domestic and international levels.
Lack of privacy due to surveillance of personal data, which is becoming ubiquitous around the world, induces persistent conformity to the norms prevalent under the surveillance regime. We document this channel in a unique laboratory---the widespread surveillance of private citizens in East Germany. Exploiting localized variation in the intensity of surveillance before the fall of the Berlin Wall, we show that, at the present day, individuals who lived in high-surveillance counties are more likely to recall they were spied upon, display more conformist beliefs about society and individual interactions, and are hesitant about institutional and social change. Social conformity is accompanied by conformist economic choices: individuals in high-surveillance counties save more and are less likely to take out credit, consistent with norms of frugality. The lack of differences in risk aversion and binding financial constraints by exposure to surveillance helps to support a beliefs channel.
This collection edited by Dave De ruysscher, Albrecht Cordes, Serge Dauchy and Heikki Pihlajamäki considers what size or varieties of business were considered to be the best. The answer to this question depends on the time period under examination, and it also differs between jurisdictions. The chapters in the collection take a broad approach as they collectively cover a long time span and have a wide geographical spread. They consider examples from the Middle Ages, the early modern period and the 19th century. The places examined here are now in the jurisdictions of Germany, Italy, Belgium, Spain and England. As a whole, the chapters address some of the tension between the perceived advantages and disadvantages of big business against the small and medium enterprises (SMEs) and also the limited liability corporation in comparison to the unlimited liability partnership form. The edited collection takes a deliberately integrative approach, as it combines concepts and ideas from legal studies with those of economic history, business studies and comparative political analysis. ...
When Christine Lagarde announced her first, moderate rescue package, she called upon member states to provide fiscal aid. But the markets showed to have lost confidence in fiscal policy. In the absence of strong monetary policy signals, the slide continued until Lagarde in her second attempt opened the floodgates.
We employ a proprietary transaction-level dataset in Germany to examine how capital requirements affect the liquidity of corporate bonds. Using the 2011 European Banking Authority capital exercise that mandated certain banks to increase regulatory capital, we find that affected banks reduce their inventory holdings, pre-arrange more trades, and have smaller average trade size. While non-bank affiliated dealers increase their market-making activity, they are unable to bridge this gap - aggregate liquidity declines. Our results are stronger for banks with a higher capital shortfall, for non-investment grade bonds, and for bonds where the affected banks were the dominant market-maker.
Common ownership and the (non-)transparency of institutional shareholdings: an EU-US comparison
(2022)
This paper compares the extent of common ownership in the US and the EU stock markets, with a particular focus on differences in the ap- plicable ownership transparency requirements. Most empirical research on common ownership to date has focused on US issuers, largely relying on ownership data obtained from institutional investors’ 13F filings. This type of data is generally not available for EU issuers. Absent 13F filings, researchers have to use ownership records sourced from mutual funds’ periodic reports and blockholder disclosures. Constructing a “reduced dataset” that seeks to capture only ownership information available for both EU and US issuers, I demonstrate that the “extra” ownership information introduced by 13F filings is substantial. However, even when taking differences in the transparency situation into due account, common ownership among listed EU firms is much less pronounced than among listed US firms by any measure. This is true even if the analysis is limited to non-controlled firms.
The recovery plan of the Commission entitled "Next Generation EU" proposes a compromise that goes beyond the ominous lowest common denominator. With a package of EUR 750bn in total, comprising EUR 250bn in loans and the rest in grants, the Commission paves the way for both forward-looking public finance and constitutional innovation. The proposals are masterpieces of high-tech legal engineering. Again, European constitutional law evolves through crisis. Yet, again, it stands to reason how far the proposed instruments will shift the European Union towards enhancing solidarity and democracy.
Search costs for lenders when evaluating potential borrowers are driven by the quality of the underwriting model and by access to data. Both have undergone radical change over the last years, due to the advent of big data and machine learning. For some, this holds the promise of inclusion and better access to finance. Invisible prime applicants perform better under AI than under traditional metrics. Broader data and more refined models help to detect them without triggering prohibitive costs. However, not all applicants profit to the same extent. Historic training data shape algorithms, biases distort results, and data as well as model quality are not always assured. Against this background, an intense debate over algorithmic discrimination has developed. This paper takes a first step towards developing principles of fair lending in the age of AI. It submits that there are fundamental difficulties in fitting algorithmic discrimination into the traditional regime of anti-discrimination laws. Received doctrine with its focus on causation is in many cases ill-equipped to deal with algorithmic decision-making under both, disparate treatment, and disparate impact doctrine. The paper concludes with a suggestion to reorient the discussion and with the attempt to outline contours of fair lending law in the age of AI.
Warum das Stichwort Corona Bonds so viele falsche Assoziationen weckt, und wie sie beschaffen sein müssten, damit auch Deutschland damit gut klarkommt: Vor der morgigen Sitzung der Eurogruppe spricht Max Steinbeis mit MATTHIAS GOLDMANN über seinen Vorschlag und die damit verknüpften Chancen und Risiken.
This paper contrasts the recent European initiatives on regulating corporate groups with alternative approaches to the phenomenon. In doing so it pays particular regard to the German codified law on corporate groups as the polar opposite to the piecemeal approach favored by E.U. legislation.
It finds that the European Commission’s proposal to submit (significant) related party transactions to enhanced transparency, outside fairness review, and ex ante shareholder approval is both flawed in its design and based on contestable assumptions on informed voting of institutional investors. In particular, the contemplated exemption for transactions with wholly owned subsidiaries allows controlling shareholders to circumvent the rule extensively. Moreover, vesting voting rights with (institutional) investors will not lead to the informed assessment that is hoped for, because these investors will rationally abstain from active monitoring and rely on proxy advisory firms instead whose competency to analyze non-routine significant related party transactions is questionable.
The paper further delineates that the proposed recognition of an overriding interest of the group requires strong counterbalances to adequately protect minority shareholders and creditors. Hence, if the Commission choses to go down this route it might end up with a comprehensive regulation that is akin to the unpopular Ninth Company Law Directive in spirit, though not in content. The latter prediction is corroborated by the pertinent parts of the proposal for a European Model Company Act.
We identify strong cross-border institutions as a driver for the globalization of in-novation. Using 67 million patents from over 100 patent offices, we introduce novel measures of innovation diffusion and collaboration. Exploiting staggered bilateral in-vestment treaties as shocks to cross-border property rights and contract enforcement, we show that signatory countries increase technology adoption and sourcing from each other. They also increase R&D collaborations. These interactions result in techno-logical convergence. The effects are particularly strong for process innovation, and for countries that are technological laggards or have weak domestic institutions. Increased inter-firm rather than intra-firm foreign investment is the key channel.
Bitcoin stands like no other cryptocurrency for the profound transformation of financial markets in the digital economy. While the last few months saw the free trade in goods struggle against trends towards protectionism, cryptocurrencies seemed to tear down one border after the other – physical, geographic, and legal ones alike. A libertarian’s wet dream. Blockchain presents itself as a fortress against state intervention, for whatever purpose. Finally, a technological, market-based solution would put an end to the problem of monetary policy, payment transactions, and make whole chunks of government regulation superfluous. ...
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.
Die durch das Zweite Corona-Steuerhilfegesetz erfolgte Ausweitung des Verlustrücktrags ist dem Grunde nach ein hochgradig geeignetes und insbesondere breitenwirksames Mittel zur Stützung der Konjunktur. Das vorliegende Policy White Paper legt dar, dass allerdings Art und Umfang der gewählten Ausweitung unzureichend sind. Hierzu analysieren die Verfasser, wie sich die Ausweitung auf Unternehmen unterschiedlicher Größe und Rechtsform auswirkt. Auf Basis dieser Analyse zei-gen sie sodann, dass gemessen an den verfolgten konjunkturpolitischen Zielen es geboten gewesen wäre und weiterhin geboten ist, den Verlustrücktrag auf die Gewerbesteuer zu erstrecken.
Increasing the diversity of policy committees has taken center stage worldwide, but whether and why diverse committees are more effective is still unclear. In a randomized control trial that varies the salience of female and minority representation on the Federal Reserve’s monetary policy committee, the FOMC, we test whether diversity affects how Fed information influences consumers’ subjective beliefs. Women and Black respondents form unemployment expectations more in line with FOMC forecasts and trust the Fed more after this intervention. Women are also more likely to acquire Fed-related information when associated with a female official. White men, who are overrepresented on the FOMC, do not react negatively. Heterogeneous taste for diversity can explain these patterns better than homophily. Our results suggest more diverse policy committees are better able to reach underrepresented groups without inducing negative reactions by others, thereby enhancing the effectiveness of policy communication and public trust in the institution.
Do required minimum distribution 401(k) rules matter, and for whom? Insights from a lifecylce model
(2021)
Tax-qualified vehicles helped U.S. private-sector workers accumulate $25Tr in retirement assets. An often-overlooked important institutional feature shaping decumulations from these retirement plans is the “Required Minimum Distribution” (RMD) regulation, requiring retirees to withdraw a minimum fraction from their retirement accounts or pay excise taxes on withdrawal shortfalls. Our calibrated lifecycle model measures the impact of RMD rules on financial behavior of heterogeneous households during their worklives and retirement. We show that proposed reforms to delay or eliminate the RMD rules should have little effects on consumption profiles but more impact on withdrawals and tax payments for households with bequest motives.
Extant research shows that CEO characteristics affect earnings management. This paper studies how investors infer a specific characteristic of CEOs, namely moral commitment to honesty, from earnings management and how this perception – in conjunction with their own social and moral preferences – shapes their investment choices. We conduct two laboratory experiments simulating investment choices. Our results show that participants perceive a CEO to be more committed to honesty when they infer that the CEO engaged less in earnings management. For investment decisions, a one standard deviation increase in a CEO's perceived commitment to honesty compared to another CEO reduces the relevance of differences in the CEOs’ claimed future returns by 40%. This effect is most prominent among investors with a proself value orientation. To prosocial investors, their own honesty values and those attributed to the CEO matter directly, while returns play a secondary role. Overall, perceived CEO honesty matters to different investors for distinct reasons.
Bundesfinanzminister Wolfgang Schäubles Behauptung, Griechenland könne wegen Art. 125 AEUV nur außerhalb der Eurozone seine Schulden gegenüber anderen Euro-Staaten und EFSF bzw. ESM restrukturieren, beruht auf einem Denkfehler, wenn nicht gar auf einem Taschenspielertrick. Die Pringle-Rechtsprechung des EuGH zeigt: Das Europarecht schaufelt sich nicht sein eigenes Grab. Man muss es nicht erst umgehen, um die Ziele der Union wahrhaft zu verwirklichen.