Financial Stability Review
Regulatory Structure Articles
2005
2005 2004 2003 2002 2001 2000 1999 1998 1997
Financial
Stability: Managing Liquidity Risk in a Global System
(66k)
(Issue 19, December 2005)
In this speech Sir Andrew Large,(2) the Bank of England’s
Deputy Governor for Financial Stability, puts the case for central
banks and regulators in all jurisdictions to review the appropriateness
of current liquidity standards. He
argues that even in today’s relatively benign environment
banks are vulnerable, by their nature, to liquidity risk; certain
features of modern risk transfer markets may create new vulnerabilities.
Liquidity cushions remain the first line of defence in periods
of stress, and the increasingly global nature of financial firms
and their activities means that national financial stability
depends on liquidity standards imposed in many jurisdictions.
He does not call for full harmonisation of liquidity standards
in the way that capital standards have been harmonised. But
central banks and regulators need, at least, a common understanding
of what they are individually seeking to achieve with liquidity
regulation.
Bank
Weakness and Bank Loan Supply
(153k)
(Issue 19, December 2005)
A concern for policymakers is the possibility of an impairment
of financial intermediation that arises when banks’ balance
sheets are weakened and banks are unwilling or unable to provide
loans to companies and households.
These loan supply effects have the potential to reduce aggregate
investment and to amplify macroeconomic fluctuations. However,
to date there is little systematic evidence on the strength
of these effects. The research
presented in this article brings comprehensive cross-country
evidence to bear on this issue. Our results indicate that loan
supply effects are pervasive and not confined to particular
countries and particular times. They also suggest that bank
capital requirements might play a role in increasing such effects,
calling for careful study of regulatory design in this regard.
A Model to Analyse Financial Fragility
(282k)
(Issue 18, June 2005)
This article outlines the results of a programme of research, undertaken within the Bank, to try to develop a theoretically rigorous, but also an empirically tractable, model of the banking system. The Bank of England, in conjunction with HM Treasury and the Financial Services Authority, is responsible for maintaining systemic stability. The possibility of contagious failures between banks and their borrowers could be a major threat to such stability. In order to assess such dangers, a model for the analysis of financial stability needs to include amongst its characteristics heterogeneous agents, in the form of banks and their customers, and the possibility of default.
A Framework for Financial Stability
(188k)
(Issue 18, June 2005)
This is the text of a speech delivered by Sir Andrew Large, the Bank of England's Deputy Governor for Financial Stability, at the International Conference on Financial System Stability and Implications of Basel II on 18May 2005 in Istanbul.
Key Resources
|
Memorandum of Understanding between HM Treasury,
the Bank of England and the Financial Services Authority
Download PDF (50k) |
