Author Archives: Guest Blogger

Danske Bank Money Laundering Case Study

By | September 11, 2019

Courtesy of Lee Reiners and Joseph A. Smith Jr. This case study draws primarily—and in some instances quotes verbatim—from the “Report on the Non-Resident Portfolio at Danske Bank’s Estonian Branch” prepared for the Bank on September 19, 2018, by the law firm Bruun & Hjejle.[1] Additional details are derived from other sources, including Danske Bank… Read More »

Can Technology Undermine Macroprudential Regulation: Evidence from Marketplace Lending in China

By | September 10, 2019

Courtesy of Alberto Manconi, Fabio Braggion, and Haikun Zhu The Global Financial Crisis led economists and regulators to refocus on the relationship between household leverage and macroeconomic performance. The ensuing debate has revolved around how best to contain household debt using a variety of approaches, with much emphasis being placed on loan-to-value (LTV) caps, i.e.… Read More »

Regulators Should be More Prescriptive About the Quantification of Cyber Risks

By | September 5, 2019

Courtesy of Mete Feridun* Although operational risk capital requirements drive a substantial proportion of banks’ capital requirements, quantification of cyber incidents still represent a relative “backwater” of the ever-evolving global regulatory framework. Surprisingly, the new “Basel IV” operational risk framework does not include any specific reference to cyber risks. While regulators expect firms to integrate… Read More »

A New Source of Systemic Risk: Cloud Service Providers

By | August 8, 2019

Courtesy of David Fratto and Lee Reiners Last week’s announcement that a hacker accessed the personal information of approximately 106 million Capital One card customers and applicants has cast fresh light on financial institutions increasing reliance on the cloud. The hacker, a former employee of Amazon Web Services Inc., allegedly breached Capital One’s firewalls to… Read More »

Can Tax Regulation Curb Excessive Executive Pay?

By | August 7, 2019

Courtesy of Tobias Bornemann, Martin Jacob, and Mariana Sailer For at least two decades, executive compensation has been widely discussed in public policy. Debates about inequality, risk-taking behavior, and excessiveness led to policy interventions – often by means of tax instruments – intending to control executive compensation. For example, back in 1993, the U.S. introduced… Read More »

Macroprudential Policy with Capital Buffers

By | July 30, 2019

Courtesy of Josef Schroth The Global Financial Crisis exposed taxpayers to potential losses from bank failures and significantly disrupted financial intermediation. A natural question arises from these experiences: Should regulators require banks to hold more capital and, if so, in what form? Higher minimum requirements reduce losses to stakeholders in case of bank failures but may constrain… Read More »

Career Experience and Executive Performance: Evidence from Former Equity Research Analysts

By | July 18, 2019

Courtesy of Shawn Huang Organizational outcomes have long been known to be, at least in part, determined by executives’ idiosyncratic characteristics. Prior research shows that Chief Executive Officers (CEOs) and Chief Financial Officers (CFOs) uniquely impact corporate practices and operations. Peering into these effects, recent studies examine executive heterogeneity with respect to aspects such as… Read More »

How Does the Market React When Shareholders Lose Power?

By | July 9, 2019

Courtesy of Ali Akyol Rule 14a-8 of the Securities Exchange Act of 1934 allows shareholders to submit non-binding proposals demanding a vote on certain corporate matters at annual meetings. In theory, improving shareholder rights reduces agency costs associated with the separation of ownership and control. Shareholder proposals, thus, could reduce agency costs by increasing the… Read More »

Supervisory Benchmarks and Artificial Intelligence: A View from Germany

By | July 1, 2019

Courtesy of Julia von Buttlar* Artificial intelligence (AI) technologies are increasingly being used in a variety of fields, none more so than the financial industry. AI offers great opportunities; it can enable companies to automate manual processes and meet their regulatory requirements at a higher speed with a lower error rate and less effort. For… Read More »