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1. Evolve or Perish: The Global Forces Changing the Business of Banks

Author:
Robert Fay and Angelo Arcelli
Publication Date:
04-2019
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Following the 2008 financial crisis, the Group of Twenty embarked on an ambitious financial regulatory reform plan that has seen many banks worldwide make substantial progress in terms of both capitalization and governance. Over this period, banks have also become increasingly exposed to business risks from digitization, artificial intelligence and cybercrime, and major investments are necessary to manage these risks. New regulations have been introduced in the European Union to reduce these risks, but their associated costs have potentially created a lasting competitive disadvantage for European banks. This situation has raised some key questions that deserve to be discussed and investigated: How does regulation — including that outside the sector — affect banks’ ability to compete globally? What will be the impact of fintech players as well as globally active banks from China and other emerging markets? Can the Basel regulatory framework and Financial Stability Board (FSB) ensure a level playing field globally going forward, or has the regulatory pendulum swung too far? How will the supervisory approach need to be adapted to the changing structure of the global financial system? Moreover, how will the implementation of Basel reforms affect the industry? These and other questions remain about the effectiveness of the already-achieved reforms as well as their future direction. These issues were at the core of CIGI and Oliver Wyman’s fifth annual Financial Regulatory Outlook Conference, held in Rome on November 28, 2018. This conference report summarizes the key points of discussions at the conference, with a special focus on the 10 years of regulatory reform that was conducted under the auspices of the FSB and the new forces that are currently affecting banks and could have an impact on the future.
Topic:
Financial Crisis, Regulation, Europe Union, and Digital Culture
Political Geography:
Europe and Global Focus

2. Beyond International Standards: Mapping the Future of Capital Markets Regulation

Author:
Cally Jordan
Publication Date:
09-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
As a response to multiple financial shocks, international standards have disappointed. Consensus seeking has stifled innovation, perpetuating outdated regulatory concepts at a time of rapid market change. Markets are complex and idiosyncratic; they may not be receptive to efforts toward producing regulatory harmonization and convergence. Alternatives to international standard setting should be explored. Possibilities include fora for experimentation in capital markets regulation, the creation of a set of variegated model capital markets laws and a “restatement”-like treatise.
Topic:
Markets, Financial Crisis, Regulation, and Capitalism
Political Geography:
Global Focus

3. Addressing Excessive Risk Taking in the Financial Sector: A Corporate Governance Approach

Author:
Steven L. Schwarcz and Maziar Peihani
Publication Date:
09-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Excessive corporate risk taking by systemically important financial institutions (SIFIs) is widely seen as one of the primary causes of the global financial crisis. In response, an array of international reforms, under the auspices of the Group of Twenty’s (G20’s) standard-setting bodies, has been adopted to try to curb that risk taking. However, these reforms only impose substantive requirements, such as capital adequacy, and cannot by themselves prevent future systemic collapses. To complete the G20 financial reform agenda, SIFI managers should have a duty to society (a public governance duty) not to engage their firms in excessive risk taking that leads to systemic externalities. Regulating governance in this way can help supplement the ongoing regulatory reforms and reduce the likelihood of systemic harm to the public.
Topic:
Financial Crisis, Reform, Regulation, Risk, and Financial Institutions
Political Geography:
Global Focus

4. Euro-area Governance Reform: The Unfinished Agenda

Author:
Miranda Xafa
Publication Date:
11-2018
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Since the debt crisis of 2010-2012, sustained efforts toward deeper integration, supported by accommodative monetary policy, helped promote the recovery of the euro-area economy and dispelled fears of a breakup of the single currency. Fiscal rules were tightened and macro surveillance tools were set up for crisis prevention. Yet significant challenges remain to be tackled. Gaps remain in the euro-area architecture; limited progress has been made in establishing the Capital Markets Union and the banking union remains incomplete. Today’s environment of solid growth remains an ideal time to advance the reform agenda. There is wide agreement that building a well-functioning and resilient monetary union in Europe requires further steps to break the bank-sovereign doom loop and to increase risk sharing among members of the union. Many competing proposals have been tabled to make the governance of the euro area more robust. Views differ on the shape and sequencing of reforms, and on the degree of integration that is ultimately desirable, with some observers arguing for a full fiscal union with shared risk, and others going all the way to full political union through the creation of a federal state. This paper assesses and prioritizes key proposals that are economically sound and politically feasible.
Topic:
Debt, Regional Cooperation, Financial Crisis, and European Union
Political Geography:
Europe

5. Assessing the Governance Practices of Sustainability Reporting

Author:
Jason Thistlethwaite and Melissa Menzies
Publication Date:
01-2016
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
To promote climate change risk mitigation in financial markets, the Financial Stability Board recently proposed the creation of a Climate Disclosure Task Force, coordinated through the G20, to develop standards for companies to disclose their exposure to climate change risks. With more than 400 existing disclosure schemes, this task will be challenging. This brief identifies the key categories of governance practices that must be addressed, how these divergent practices challenge end-users, and how the establishment of criteria that define effective and efficient reporting is a critical first step for the Climate Disclosure Task Force.
Topic:
Climate Change, Economics, Markets, and Financial Crisis
Political Geography:
Global Focus

6. Does the Level of Public Debt Matter?

Author:
Susan Schadler
Publication Date:
04-2016
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Research on links between the level of a country’s public debt and its broader economic developments has been heatedly debated in the economic literature. Two strands of the research stand out — one linking the level of debt to a country’s GDP growth rate and the other examining the debt level as an EWI of economic crises. As a broad generalization, research at the moment favors the view that high levels of debt are not a cause, in and of themselves, of low growth nor are they particularly good predictors of impending economic or even debt crises. In principle, the empirical findings have obvious implications for policy makers confronting the question of how to fashion policies (and fiscal policy in particular) when a country has a high debt burden. The IMF, as both a contributor to the literature and an adviser concerned with preventing or dealing with debt crises, has a particularly important stake in navigating the findings. Whether in its surveillance (routine annual advice to all member countries) or the construction of its lending programs to support countries in or near crisis, the IMF must answer the question “how much does the level of debt matter?” Despite the empirical research that casts doubt on the importance of debt, the level of debt figures prominently in the algebra of debt sustainability and the IMF’s real world policy advice. This policy brief examines the nexus of the relatively strong conclusions coming from the academic research and the IMF’s policy advice. It addresses the following question: given that the broad conclusion from the academic literature is that the level of debt itself is not systematically bad for growth or stability, why does the debt level seem to figure rather prominently in the IMF’s policy advice and conditionality?
Topic:
Debt, Development, Economics, International Monetary Fund, Financial Crisis, GDP, and Global Markets
Political Geography:
Global Focus

7. Jurisdiction on the Internet: From Legal Arms Race to Transnational Cooperation

Author:
Bertrand de la Chapelle and Paul Fehlinger
Publication Date:
04-2016
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The past 20 years have witnessed a profound change in the types of non-resident investors who provide funding to emerging market economies (EMEs) and the financial instruments through which emerging market (EM) corporations borrow from abroad. Until the beginning of the new millennium, private capital flows to EMEs were mainly intermediated by large global banks, and EMEs were subjected to massive volatility in their external payments balances, exchange rates and domestic financial systems. But since the early 2000s the role of bank-intermediated credit has declined, as the base of investors willing to take on exposure to EM corporate debt has become much larger and more diverse. These structural changes have encouraged a vast growth in flows of funds, not only from the mature economies to EMEs as a group, but also among EMEs themselves.
Topic:
Debt, Economics, Emerging Markets, International Trade and Finance, and Financial Crisis
Political Geography:
Global Focus

8. The 2015 Survey of Progress in International Economic Governance

Author:
Domenico Lombardi and Kesley Shantz
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
The annual CIGI Survey of Progress in International Economic Governance assesses progress in five areas of international economic governance: macroeconomic and financial cooperation; cooperation on financial regulation; cooperation on development; cooperation on trade; and cooperation on climate change.
Topic:
Climate Change, Economics, Financial Crisis, and Governance
Political Geography:
Global Focus

9. Populist Movements: A Driving Force behind Recent Renationalization Trends

Author:
Jonathan Diab and Anna Klimbovskaia
Publication Date:
09-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Populist uprisings often call for the renationalization or buying back of public goods that were originally privatized as a result of austerity measures established and disseminated by the International Monetary Fund and the World Bank.
Topic:
Economics, International Monetary Fund, Financial Crisis, World Bank, and Popular Revolt
Political Geography:
Global Focus

10. Just Enough, Just in Time: Improving Sovereign Debt Restructuring for Creditors, Debtors and Citizens

Author:
Richard Gitlin and Brett House
Publication Date:
07-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Recent international financial turmoil — most notably in Greece — has refocused attention on the risks posed by severe sovereign debt crises and weaknesses in our approaches to restructuring sovereign debt. Since early 2010, these risks have driven a range of debt-related policy proposals and actions in individual economies, across regions and at the international financial institutions. While some incremental first reform steps have been taken, these have not yet produced a more efficient, effective or resilient international framework for handling severe sovereign debt crises and effecting sovereign debt workouts. In contrast, some institutional and policy changes made in the heat of the euro-zone crisis have raised as many questions as they have resolved. Old policy ideas are also being resurrected and configured in new ways for current challenges. After years of substantial fiscal stimulus and exceptional monetary policies, high debt burdens across the advanced economies, fears of secular stagnation, signs of an imminent increase in US borrowing costs and deteriorating demographics together make a compelling case for concerted action to improve international arrangements for dealing with distressed sovereign debt.
Topic:
Debt, Economics, Monetary Policy, Financial Crisis, and Global Markets
Political Geography:
Global Focus

11. Corporate Debt in Emerging Economies: A Threat to Financial Stability?

Author:
Barry Eichengreen, Domenico Lombardi, Malcolm D. Knight, Yu Yongding, Stephen G. Cecchetti, Diane De Gramont, Şebnem Kalemli-Özcan, Phillip R. Lane, Ugo Panizza, and Viral V. Acharya
Publication Date:
09-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
During 1999-2007, the international balance sheets of emerging economies grew stronger through a combination of current account surpluses, a shift from debt funding to equity funding, and the stockpiling of liquid foreign reserves. This risk-mitigating strategy improved the international financial standing of many emerging economies and helped these economies withstand the 2008-2009 global financial crisis. However, a combination of domestic and external factors has led to a partial reversal of this strategy, with some emerging economies accumulating significant external debt since 2010. Previewed by the May 2013 “taper tantrum,” there has been considerable speculation that a tightening of dollar-funding conditions and a macroeconomic slowdown in emerging economies may result in financial instability in some emerging economies.
Topic:
Debt, Economics, Emerging Markets, International Trade and Finance, Financial Crisis, and Global Markets
Political Geography:
Global Focus

12. International Regulatory Cooperation on the Resolution of Financial Institutions: Where Does India Stand?

Author:
Renuka Sane
Publication Date:
04-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper provides a brief description of the principles of cross-border resolution that have emerged after the 2008 global financial crisis, and the progress that has been achieved. The paper then provides an overview of developments on resolution of financial firms in India. It finds that while there is cognizance of the need for international cooperation on resolution, the focus is on first developing institutional capacity on domestic resolution that can interact with the international community in the future. The policy choices of India may be reflective of the thinking in a large number of emerging markets, which considerably lag behind the more developed markets, partly due to lower interconnectedness and partly due to limited experience in domestic resolution.
Topic:
Development, Emerging Markets, International Trade and Finance, Political Economy, and Financial Crisis
Political Geography:
India

13. Ukraine and the IMF's Evolving Debt Crisis Narrative

Author:
Susan Schadler
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Against the International Monetary Fund’s (IMF’s) fraught experience with crises where debt restructuring is needed, Ukraine’s recent restructuring agreement has been a success. Several factors — in particular, Ukraine’s geopolitical position and the composition of its creditors — facilitated official support for the deal. As these are unlikely to be replicated in future debt crises, the IMF still needs a revamping of its policies and approach in crises requiring debt restructuring. This policy brief examines a number of key challenges in the evolution of a coherent role for the IMF in future crises.
Topic:
Debt, Political Economy, International Monetary Fund, Financial Crisis, and Global Markets
Political Geography:
Ukraine

14. The 2015 Survey of Progress in International Economic Governance

Author:
Domenico Lombardi and Kelsey Shanty
Publication Date:
11-2015
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
The annual CIGI Survey of Progress in International Economic Governance assesses progress in five areas of international economic governance: macroeconomic and financial cooperation; cooperation on financial regulation; cooperation on development; cooperation on trade; and cooperation on climate change. In this year’s survey, 31 CIGI experts conclude that international economic arrangements continue to show a level of “status quo,” averaging a score of 50% across all five areas. The 2015 survey indicates a slight improvement to the result of last year’s survey, which suggested a minimal regression overall. The experts’ assessment of progress was most promising in the area of climate change cooperation, with an average score of 57%, whereas the least promising area was macroeconomic and financial cooperation, with a score of 44%, indicating minimal regression. The remaining three areas polled all fell within the “status quo” range, with trade at 46%, development at 48% and international cooperation on financial regulation at 53%. Interestingly, in the area of cooperation on development, CIGI’s experts provided a relatively mixed assessment. Responses varied based on experts’ perception of the effectiveness of current rhetoric, from 70% (indicating some progress) to 10% (suggesting major regression). Compared to last year, climate change governance has made the greatest improvement, but the remaining three areas (with the exception of development, which was not included in the 2014 survey) have all, on average, regressed further or remained stagnant. This trend is cause for concern.
Topic:
Climate Change, Development, International Political Economy, International Trade and Finance, and Financial Crisis
Political Geography:
Global Focus

15. Short-selling Bans and the Global Financial Crisis: Are They Interconnected?

Author:
Pierre L. Siklos, Martin T. Bohl, and Badye Essid
Publication Date:
03-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper observes that short-selling bans spread globally beginning in 2007. We seek to empirically determine whether there were spillover effects over and above the domestic impact from the imposition of such bans. There is some evidence that the bans were unsuccessful, at least insofar as they did not take into account the global component a short-selling ban might have. In the individual countries we examine, the bans had relatively little impact. Nevertheless, our finding that equity returns do not appear to show a decline may be evidence that the bans stemmed further deterioration in stock prices that policy makers sought to avoid.
Topic:
Financial Crisis

16. The Shadow Banking System of China and International Regulatory Cooperation

Author:
Zheng Liansheng
Publication Date:
03-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The shadow banking system was defined in 2007 by Paul McCulley, the managing director of Pacific Investment Management Company, but it began to receive significant attention in the immediate aftermath of the GFC. Since the beginning of the financial crisis in 2008, the regulatory agencies of different countries, international organizations and think tanks have all carried out in-depth research into shadow banking and have released a series of results. Regulatory reforms have also addressed shadow banking, the most important of which is the US Dodd-Frank Act of 2010, which aims to restrain the expansion and risk taking of shadow banking in the United States. The United Kingdom and the European Union have also adopted reforms and built up a supervisory system to track the risks of the shadow banking system.
Topic:
Financial Crisis
Political Geography:
United States, China, United Kingdom, and Europe

17. Changing Global Financial Governance: International Financial Standards and Emerging Economies since the Global Financial Crisis

Author:
Hyoung-Kyu Chey
Publication Date:
02-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
One of the most remarkable changes in global financial governance since the 2008-2009 crisis has been the primary forums that establish international standards extending their memberships to include emerging economies. There are two disparate perspectives in the literature on the impact of this change on international financial regulation: the weakening cooperation view, which sees an attenuation of international cooperation due to this change, and the enduring status quo view, which sees the domination of global financial governance by advanced economies persisting even despite it. This paper presents an alternative — more positive — perspective. It argues that extending membership to include emerging economies has, to some extent, actually strengthened their role in the rule-making process related to international standards, by allowing them to participate in that process from the very beginning. Their role, however, has been constrained due to their shortages of regulatory expertise, and has focused mainly on the defensive dimension of mitigating the negative effects of international standards on emerging economies. In addition, their lack of available resources significantly limits their ability to actually incorporate their preferences into international standards. The research presented in this paper also argues that the expanded membership has had positive impacts on emerging economies' compliance with international standards, by increasing their exposure to external compliance pressures and also by heightening compatibility between their own regulatory preferences and the international standards. These findings suggest that a further strengthening of emerging economies' inclusion in the rule making related to international financial standards is likely to enhance rather than hinder international cooperation in this area.
Topic:
Financial Crisis

18. Cross-border Resolution of Financial Firms

Author:
Isabelle Duchane, Kateryna Dzaha, and James Supeene
Publication Date:
07-2015
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The absence of an effective international regime for cross-border resolution of financial firms led to the disorderly failure of a number of global banks during the global financial crisis, at a high cost to taxpayers and global financial stability. Many jurisdictions still lack sufficient resolution powers and arrangements for cross-border cooperation. This brief proposes that the Financial Stability Board’s Key Attributes of Effective Resolution Regimes for Financial Institutions should be fully implemented within the Group of Twenty (G20) and expanded to include non-G20 states. The FSB should develop a series of model laws on cross-border resolution and endorse a multilateral memorandum of understanding containing reciprocal commitments among the signatories.
Topic:
International Trade and Finance, Financial Crisis, Reform, and G20
Political Geography:
Global Focus

19. Reforming Finance: Macro and Micro Perspectives

Author:
Pierre Siklos
Publication Date:
02-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Reforms of the financial system in the wake of the global financial crisis are incomplete. Beyond reforms, good judgment is essential in a crisis. Short-termism in finance cannot be completely controlled by regulation and supervision. Financial crises are inevitable but need not be as virulent at the global financial crisis. Central banks will have to rethink their policies and how they interact with other agencies partially responsible for maintaining financial system stability.
Topic:
Economics, Globalization, International Trade and Finance, Financial Crisis, Governance, and Reform
Political Geography:
Europe

20. The IMF's Preferred Creditor Status: Does It Still Make Sense After the Euro Crisis?

Author:
Susan Schadler
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Throughout the history of IMF lending, the institution has had PCS — that is, distressed countries borrowing from the IMF are expected to give priority to meeting their obligations to the IMF over those to other (private or official) creditors. This status is a defining characteristic of the IMF's role in financial crises: it provides a high degree of confidence that IMF resources are safe even when other creditors of the distressed country face substantial uncertainty about whether they will be repaid in full. In other words, the IMF, which lends to some of the riskiest countries in the world, faces minimal risk that its resources could be compromised by a debtor country's difficulties in servicing its debt. It does so, however, with the confidence that comes from its role in helping to formulate and monitor a program of policies that are strongly expected to return the country to stability.
Topic:
Debt, Economics, International Monetary Fund, Monetary Policy, and Financial Crisis
Political Geography:
Europe

21. A Failure to Cooperate? Raising the Risks and Challenges of Exiting Unconventional Monetary Policies

Author:
Domenico Lombardi, Pierre Siklos, and Samantha St. Amand
Publication Date:
03-2014
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Central banks (and policy makers more generally) should seek a global consensus before implementing policies that may have global repercussions. The global economy can only become more resilient to shocks when there is greater central bank cooperation. The G20 is a natural venue to promote cooperation and to help the global economy return to stronger economic growth, but other forums may also be appropriate. The maintenance of financial stability is a common resource and should be treated as such. Excessive reliance on sovereignty is counterproductive and contains the seeds of the next crisis.
Topic:
Economics, International Cooperation, International Trade and Finance, Markets, and Financial Crisis

22. Comments on the September 29, 2014 FSB Consultative Document, "Cross-Border Recognition of Resolution Action"

Author:
Steven L. Schwarcz
Publication Date:
11-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The International Law Research Program (ILRP) of the Centre for International Governance Innovation (CIGI) welcomes the opportunity to comment on the Financial Stability Board's (FSB's) Consultative Document, “Cross-Border Recognition of Resolution Action” (hereafter referred to as the “Consultative Document”) that was released on September 29, 2014.
Topic:
International Trade and Finance, Financial Crisis, and Reform

23. China in the G20 Summitry: Review and Decision-making Process

Author:
Alex He
Publication Date:
10-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
As the largest emerging economy, China believes that the Group of Twenty (G20), instead of the Group of Eight (G8), is the ideal platform for its participation in global governance. This paper examines the reasons why China joined the G20 rather than the G8, and then focuses on a detailed review of China's participation in G20 summits since the enhanced forum began in 2008. China took a very active and cooperative attitude in dealing with the global financial crisis in 2008-2009. The paper observes that China also insisted on its own agenda for reforms to the international monetary system, through reforms to the international financial institutions that manage it — in particular, raising the number of voting shares and the representation of developing countries at the IMF and the World Bank. Based on the reviews of China's performance in the G20 summits since 2008, the paper explores China's policy making through its participation in the G20, determining that it is shaped by several major economic departments in addition to the Ministry of Foreign Affairs, and coordinated by a vice premier responsible for economic and financial affairs. The paper concludes that China has gained immensely from its participation in the G20. Most importantly, China entered the centre stage of global economic governance through the G20, which allowed the country to demonstrate that it is a responsible great power, and communicate and maintain relations with other major powers. The main challenges China has faced since joining the G20, from the perspective of some Chinese scholars, are a lack of capacity for agenda setting and shaping initiatives, as well as inadequate communication and coordination among different government departments and between the Sherpa and financial tracks of the G20.
Topic:
Economics, International Political Economy, International Trade and Finance, International Monetary Fund, Global Recession, Financial Crisis, and World Bank
Political Geography:
China

24. Reforming the Global Architecture of Financial Regulation: The G20, the IMF and the FSB

Author:
Malcolm D. Knight
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The global financial crisis that began in 2007 and deepened in 2008 exposed major weaknesses in financial and macroeconomic policy coordination, and profound flaws in financial risk management and regulation in a number of advanced countries. The severity of the crisis led global leaders to recognize that they must find a way to reform the global regulatory architecture to ensure that the financial system can absorb shocks while continuing to function efficiently.
Topic:
International Trade and Finance, Markets, International Monetary Fund, Financial Crisis, and Reform
Political Geography:
United States, United Kingdom, and Europe

25. Development: Advancement through International Organizations

Author:
Rohinton Medhora and David Malone
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The familiar world of international organizations principally devoted to development has been upended by two phenomena. First is the emergence of sustained economic success in the developing world (mostly in Asia, but increasingly also in Africa and, in a less spectacular way, Latin America) amid compelling, continuing need among the world's poor. Second, the slow-moving, serious financial and economic crisis of the industrialized world since 2008 has reordered priorities in many of their capitals toward domestic spending and away from costly international projects.
Topic:
Development, Economics, International Cooperation, International Organization, and Financial Crisis
Political Geography:
Africa, Asia, United Nations, and Latin America

26. Sovereign Debt Restructuring: Old Debates, New Challenges

Author:
James A. Haley
Publication Date:
05-2014
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Ten years ago, in the wake of the Asian financial crisis and subsequent Argentine default, the international community debated how to best promote the timely, effective restructuring of sovereign debt. The debate then focused largely on the relative merits of a so-called statutory approach for sovereign restructurings, with features of domestic bankruptcy regimes, versus the voluntary use of contractual terms designed to facilitate restructurings. At the time, the statutory approach did not have the support necessary to move from proposal to policy and efforts to improve the framework of sovereign debt restructuring rested on the contractual approach.
Topic:
Economics, International Trade and Finance, and Financial Crisis
Political Geography:
Asia

27. The Sovereign Debt Forum: Expanding Our Tool Kit for Handling Sovereign Crises

Author:
Richard Gitlin and Brett House
Publication Date:
08-2013
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
A sovereign debt forum (SDF) would assist in facilitating more predictable, transparent and timely treatments of sovereign crises during future episodes of debt-servicing difficulties. An SDF would provide a non-statutory, neutral standing body to identify lessons from past episodes of sovereign distress, maintain information on sovereign debt and convene stakeholders to engage in confidential discussions at the outset of a sovereign crisis. The SDF proposal takes inspiration from existing precedents, such as the Paris Club and Vienna Initiative, which demonstrate that informal, rules-based representative entities have a long-standing history of organizing effective workouts for distressed countries An SDF would have a limited remit: to enable early, discreet consultation and information sharing between distressed sovereigns and their creditors to speed the process by which a sovereign is returned to solvency, stability and growth. An SDF would not supersede existing institutions and would rely on close collaboration with the International Monetary Fund (IMF). An SDF would complement other proposals for automatic maturity extensions on securitized debt, arbitration and mediation processes, voluntary standstills and improved aggregation in collective action clauses (CACs). The SDF and other incremental, pragmatic proposals to improve sovereign crisis management should be put at the core of the G20 agenda on an ongoing basis.
Topic:
Economics, Financial Crisis, and Governance

28. Unsustainable Debt and the Political Economy of Lending: Constraining the IMF's Role in Sovereign Debt Crises

Author:
Susan Schadler
Publication Date:
10-2013
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The timely resolution of severe debt crises has long been one of the most difficult challenges for global financial cooperation. Focussing on the case of Greece, this paper examines how the euro crisis precipitated large International Monetary Fund (IMF) loans that violated the framework developed on the basis of the preceding decade to prevent a costly delay in restructuring. The paper reveals that safeguards meant to prevent the IMF from providing support for crisis countries without a reasonably clear path to debt sustainability failed. In fact, changes made in the context of the euro crisis to the IMF's framework for lending in severe sovereign debt crises will weaken the IMF's effectiveness in future crises. The paper concludes with four suggestions for how to re-establish an adequate framework for IMF intervention in severe debt crises in the future.
Topic:
Debt, Economics, International Monetary Fund, and Financial Crisis

29. ARBITERS AMISS: THE FAILINGS AND SHORTCOMINGS OF INSTITUTIONS GOVERNING THE GLOBAL FINANCIAL SYSTEM

Author:
Paul Blustein
Publication Date:
10-2013
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Myriad dangers beset the global economy. The US Federal Reserve is trying to curb its ultra-easy money policy, a delicate operation that could plunge the world into recession if done too abruptly. The euro zone might fall back into turmoil. Japan's experiment with “Abenomics”1 could go sour. China's banking system looks shaky. Emerging economies are suffering large scale withdrawals of foreign funds.
Topic:
Debt, Development, Economics, International Monetary Fund, Foreign Aid, Fragile/Failed State, and Financial Crisis
Political Geography:
China

30. A Markov Switching Approach to Herding

Author:
Pierre Siklos, Martin T. Bohl, and Arne C. Klein
Publication Date:
12-2013
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Existing models of market herding suffer from several drawbacks. Measures that assume herd behaviour is constant over time or independent of the economy are not only economically unreasonable, but describe the data poorly. First, if returns are stationary, then a two-regime model is required to describe the data. Second, existing models of time-varying herding cannot be estimated from daily or weekly data, and are unable to accommodate factors that explain changes in this behaviour. To overcome these deficiencies, this paper proposes a Markov switching herding model. By means of time-varying transition probabilities, the model is able to link variations in herding behaviour to proxies for sentiment or the macroeconomic environment. The evidence for the US stock market reveals that during periods of high volatility, investors disproportionately rely on fundamentals rather than on market consensus.
Topic:
Economics, Globalization, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
United States and Canada

31. Perspectives on the G20: The Los Cabos Summit and Beyond

Author:
James A. Haley
Publication Date:
06-2012
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The G20 leaders meeting in Los Cabos confront a number of challenges. Most prominent among these is the state of the global economy, which remains dangerously unbalanced, and in which the balance of risks is clearly weighted on the downside. These risks emanate from several sources.
Topic:
Economics, International Cooperation, International Organization, International Trade and Finance, Markets, and Financial Crisis
Political Geography:
China

32. How Global Watchdogs Missed a World of Trouble

Author:
Paul Blustein
Publication Date:
07-2012
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper provides the first detailed look inside the operations of the Financial Stability Forum (FSF), a little- known and secretive institution created shortly after the emerging-market crises of the late 1990s. Although other institutions have come under intense scrutiny and criticism since the eruption of the global financial crisis in 2007, the FSF has gotten much less attention than it deserves. Its primary aim was to coordinate efforts in preventing and mitigating future crises, and its members included top- ranking officials from the finance ministries, central banks and regulatory agencies of the world's richest countries. Moreover, the FSF's successor body, the Financial Stability Board (FSB) — whose name reflects the two bodies' many similarities — was established at a summit of world leaders in April 2009, amid solemn promises that the leaders were putting in place the mechanisms necessary to ensure the safety and soundness of the global financial system.
Topic:
Security, Development, Economics, Emerging Markets, Globalization, Global Recession, Financial Crisis, and Governance

33. Sovereign Debtors in Distress: Are Our Institutions Up to the Challenge?

Author:
Susan Schadler
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Global economic developments over the past two years have dashed hopes that the risks of sovereign debt crises have been tamed. The turmoil in Europe has, of course, been the most acute of these developments, but growing national fiscal imbalances, anemic prospects for growth and the expanding reach of private financial markets to newly emerging economies are potent, if less immediately threatening, signs of the risks ahead. After lying dormant for almost a decade, pressing questions about whether global institutions are capable of containing the costs of debt crises are again being raised.
Topic:
Debt, Economics, Globalization, Political Economy, Financial Crisis, and Governance
Political Geography:
Europe

34. From Bretton Woods to the Euro: How Policy-Maker Overreach Fosters Economic Crises

Author:
Pierre Siklos
Publication Date:
08-2012
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper considers the relevance of the Bretton Woods system for the prospects of reform of the international monetary system and in the context of the ongoing euro area financial crisis. It explores the challenges that must be met in attempting to reform the present international monetary system and euro area policies. After considering what resonates, and what does not, from the Bretton Woods regime of fixed exchange rates, it examines some of the key lessons from that era. The paper concludes that policy makers at Bretton Woods promised too much in terms of the stability and durability of the policy regime, and did not give sufficient thought to how the arrangement devised in the 1940s would actually function. They failed to instill the logic of collective action among their members. In particular, the Bretton Woods system failed because the agreement paid virtually no attention to governance issues. Finally, in terms of the current situation in the euro zone, policy makers have failed to recognize that the problems are not purely economic; domestic political considerations are important too. A political-economy approach is required for the design of new international monetary arrangements. The same principles apply today when we contemplate the survival of the euro zone. Politicians need to be more realistic and less ambitious, lest they create the preconditions for the next global crisis.
Topic:
Economics, Global Recession, Financial Crisis, and Governance
Political Geography:
Europe

35. National Perspectives on Global Leadership During the Cannes G20

Author:
Colin Bradford
Publication Date:
11-2011
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
Reporting from 13 G20 countries reveals that, through the eyes of the national media, the euro crisis “overwhelmed,” “dominated,” “totally sidetracked” or “hijacked” the Cannes G20 Summit on Thursday night through Friday afternoon, November 4-5, 2011. Only Argentina seems to have been captivated by the bilateral meeting between US President Barack Obama and their leader, President Cristina Kirschner, to such a degree that it overshadowed the global preoccupation with the Greek debt crisis and its implications for the euro zone and the global economy. As she did at other G20 summits, Cristina Kirschner found a way to project her own priorities and portray them to the Argentine public through deliberate preparation with her cabinet beforehand and in regional consultations, and this also held true at her appearance at the B20 (G20 business summit) held just before the G20.
Topic:
Economics, Globalization, International Cooperation, and Financial Crisis
Political Geography:
Europe and Latin America

36. Social Partnerships and Development: Implications for the Caribbean

Author:
Indianna D. Minto-Coy
Publication Date:
12-2011
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The effects of the ongoing global financial crisis have intensified the existing economic issues facing the Commonwealth Caribbean, including declining investment, productivity levels and employment opportunities for its citizens. Although the current crisis presents challenges for governments in the region, it also offers an opportunity for these countries to implement innovative solutions to contend with the short-term effects of the financial crisis, while addressing long-standing problems. A solution that has been successful in Botswana, Ireland and Barbados, is the use of social partnerships. Undertaken while these countries were facing economic and social crises, social partnership as a specific governance model allowed them to achieve levels of development and stability that other states yearn to attain.
Topic:
Development, Economics, Labor Issues, Foreign Direct Investment, Financial Crisis, and Governance
Political Geography:
Caribbean

37. G7 to G8 to G20: Evolution in Global Governance

Author:
Gordon S. Smith
Publication Date:
05-2011
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper provides a brief history of the evolution of the Group of Seven (G7) from its origins in the aftermath of the 1971 breakdown of the Bretton Woods system of exchange rates and the oil crisis in 1973. It then discusses Russia's participation at summits after the fall of the Berlin Wall, formally joining the group in 1997, thus becoming the Group of Eight (G8). The paper gives a concise account of the formation of the Group of Twenty (G20) finance ministers and central bank governors in the late 1990s, in the wake of financial crises in Asia and Latin America, which was elevated to a leaders' summit forum at the outbreak of the global financial crisis in 2008. The paper wraps up with a discussion of the differences in the G8 and G20 models, concluding that the G20 process is still the best option for meeting the challenges of complex global governance issues.
Topic:
International Cooperation, International Organization, International Trade and Finance, Financial Crisis, and Governance
Political Geography:
Russia, Asia, and Latin America

38. The Future of the G20 and Its Place in Global Governance

Author:
Paul Heinbecker
Publication Date:
04-2011
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
This paper examines the Group of 20 (the G20) from a perspective of global governance, reviewing the G20's history to date and seeking to answer two sets of questions: Is the G20 succeeding, and what does the future likely hold for it? Is it still necessary for the G20 to meet at the leaders' level, or should the enterprise be returned to finance ministers? Presuming that it endures at the leaders' level, will the G20 stick to a largely economic and financial agenda, or should it address other pressing issues? Will it complement or conflict with the Group of Eight (G8), the International Monetary Fund (IMF), the United Nations (UN) and other global institutions with economic and security vocations?
Topic:
Security, Climate Change, Economics, Emerging Markets, International Cooperation, Global Recession, Food, and Financial Crisis
Political Geography:
United Nations

39. The G20 Framework for Strong, Sustainable And Balanced Growth: A Study in Credible Cooperation

Author:
Daniel Schwanen
Publication Date:
06-2010
Content Type:
Working Paper
Institution:
Centre for International Governance Innovation
Abstract:
The G20 has launched far-ranging reforms of economic governance institutions and the manner in which key economies should cooperate in the future. Its ambitious aim is not only to stabilize the world economy following the economic crisis of 2007-09, but also to anticipate and, as far as possible, prevent future crises and foster sustainable growth going forward. A central element of the promised reform is the “Framework for Strong, Sustainable and Balanced Growth,” introduced at the 2009 summit in Pittsburgh, in which the G20 agreed to accept joint and individual responsibility for the health of the global economy. By specifying the key elements of growth, agreeing to assess their policies mutually with the help of the International Monetary Fund (IMF) and other institutions and agreeing to discuss actions required in light of these assessments, the G20 leaders have launched a potentially effective vehicle for delivering on their promises.
Topic:
Economics, International Cooperation, International Organization, Monetary Policy, and Financial Crisis

40. Developing Countries – even China – Cannot Rescue the World Economy

Author:
Manmohan Agarwal
Publication Date:
01-2010
Content Type:
Policy Brief
Institution:
Centre for International Governance Innovation
Abstract:
Many analysts believe that developed countries will recover very slowly from the global economic crisis. Consequently, they have looked to the emerging economies of the developing world to help stabilize the world economy and generate a stronger recovery. Indeed, when the financial crisis first engulfed the rich countries in 2008 and early 2009, growth in developing economies was not affected as their banks and financial systems faced neither credit problems nor a more serious meltdown. It is true that some foreign investors, particularly institutional investors, withdrew their money from developing countries with large stock exchanges, setting off stock price declines and some currency devaluations. But this did not affect the “real” economy of production and employment. There was a wide belief that many developing economies were “decoupled” from the rich economies and could continue to grow and this growth would buoy the world economy. Even when output declined dramatically in the developed economies, reducing the demand for developing countries' exports, it was expected that growth in the larger emerging economies would not be significantly affected. This has been borne out by subsequent events. Growth in China has been 8-9 percent and in India about 6 percent in the first three quarters of 2009.
Topic:
Development, Economics, Emerging Markets, International Trade and Finance, and Financial Crisis
Political Geography:
China and India