Commercial law is the legal backbone of markets and economies. Yet, over time, it has evolved into a fragmented bundle of subject-specific legal and regulatory regimes that govern non-consumer transactions and corporate actions. Some of these branches of commercial law have ancient origins, while others are more recent emergences. The laws governing secured transactions and… Read More »
Microprudential regulation aims to prevent the government from being faced with a choice between spending taxpayer money to bailout an insolvent financial institution or suffering a financial and economic collapse. Banking collapses are so costly that it is difficult to resist bailouts when they happen. But the expectation of bailouts generates moral hazard, stoking leverage… Read More »
The COVID-19 crisis is a reminder that resilient and powerful financial and banking systems are essential. In EU member states, the banking sector is the most important part of the financial system and the central source of finance for small and medium enterprises (SMEs), which make up around 99 percent of all EU companies. The… Read More »
In 2017/18, the total market capitalization of cryptocurrency markets reached all-time highs. At the same time, certain projects like BitConnect made their name as one of the most prominent ICO scams. Therefore, a stain remains on the digital asset industry from the accumulation of failed projects and subpar investment returns since the peak of the… Read More »
Excessive risk-taking in the financial sector contributed to the Global Financial Crisis of 2007-2009, leading many policymakers to consider tightening existing regulations or imposing new ones altogether. One such proposal is to tighten bank capital requirements, which have been a cornerstone of international financial regulation since the 1980s. At least part of capital requirements’ attractiveness… Read More »
Industrial banks and industrial loan companies (collectively referred to as “ILCs”) are FDIC-insured, state-chartered depository institutions. In 1987, ILCs received a statutory exemption from the definition of “bank” under the Bank Holding Company Act (“BHC Act”). Congress did not explain the purpose of the 1987 exemption, but many have argued that the exemption allows commercial… Read More »
In recent years, hackers have imposed additional costs to financial infrastructure providers through data theft and service disruptions, leading to losses for both institutions and clients alike. Are institutions reacting appropriately to these threats? How should their clients respond? Most importantly, at what cost? Crime in the Digital World In March of 2017, Equifax—one of… Read More »
Regulation mandating public disclosures by firms does not come without cost. Surveying managers’ beliefs reveals that one of the most important costs is a perceived loss of competitive advantage arising from disclosing proprietary information (i.e., proprietary cost). Almost 60% of CFOs of firms in the United States are concerned that public disclosure regulation affects their… Read More »
A credit default swap (CDS) is a credit derivative that shields protection buyers from the credit risks specified in the contract.[1] CDS has acquired public notoriety in the wake of the Global Financial Crisis and the European Debt Crisis.[2] On September 15, 2008, the $180 billion bailout of AIG thrust CDS into the spotlight for… Read More »
The stress-testing of banks is a key element of banking regulation and supervision. While the Global Financial Crisis of 2007-2008 clearly showed that bank failure may result from a lack of short-term liquidity rather than solvency, supervisory stress tests in most countries continue to focus more on solvency. Traditionally, stress tests seek to assess banks’… Read More »
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