Four major Australian banks span the Australian and New Zealand banking system. Applying the financial trilemma model, this article investigates possible approaches for cooperation in the supervision ...and resolution of these cross-border banks. The article first reviews the current arrangement in the Trans-Tasman Council of Banking Supervision, which is based on a soft law approach. Next, this article explores a trans-Tasman banking union, which would encompass joint supervision and joint resolution based on burden sharing. The challenge is political. Are the two countries willing to join forces in banking policies and thus give up part of their sovereignty in this field? And can New Zealand, as the smaller one of the two, ensure an effective voice in joint arrangements?
Since the European Council of June 2012, ‘banking union’ is a key item for the EU's policy agenda. This contribution outlines the state of the policy debate – identifying the elements that are ...missing but important from a theoretical viewpoint. Concrete proposals are made as to how the missing elements could be added in the form of a new European Deposit Insurance and Resolution Authority, which would work alongside the ‘single supervisory mechanism’ under which the European Central Bank assumes supervisory powers for the largest eurozone banks. The paper also illustrates how a gradual transition could align incentives and mitigate the political resistance to a full banking union. Finally, new estimates are provided for how much would be needed for a European Deposit Insurance and Resolution Fund.
While there is increasing interest in decarbonizing or greening monetary policy, central banks are keen to maintain market neutrality. However, there is evidence that the market has a bias towards ...carbon-intensive companies. The paper develops a method to tilt the European Central Bank's (ECB) asset and collateral framework towards low-carbon assets. We find that a medium tilting approach reduces carbon emissions in the ECB's corporate and bank bond portfolio by over 50%. We show that a low carbon allocation can be done without undue interference with the transmission mechanism of monetary policy.
Key policy insights
The ECB's asset and collateral portfolio for monetary policy operations is overweight in high carbon companies.
A medium tilting approach towards low-carbon companies reduces carbon emissions by 55% in the ECB's portfolio.
It also reduces the cost of capital for low carbon companies. This is an incentive for high carbon companies to reform and adopt low carbon technologies.
This open access textbook offers a guide to corporate finance for modern companies that want to create long-term value. Drawing on recent literature on sustainable companies, it starts by analysing ...the Sustainable Development Goals as a strategy for the transition to a sustainable economy. Next, it translates the general concept of sustainability into core corporate finance methods, such as net present value, company valuation, cost of capital, capital structure and M&A. Current corporate finance textbooks are primarily based on the shareholder model, designed to maximise financial value. This book instead adopts the integrated model, which argues that companies have to serve the interests of their current and future stakeholders. Accordingly, companies move from simply maximising financial value to optimising integrated value, which combines financial, social and environmental value. Applying this new paradigm of integrated value is the truly innovative feature of this textbook. Written for undergraduate and graduate students of Finance, Economics, and Business Administration, this textbook provides a fresh analysis of corporate finance. Combining theory, empirical data and examples from actual companies, it reveals the sustainability challenges for corporate investment and shows how finance can be used to steer funds to sustainable companies and projects and thus accelerate the transition to a sustainable economy.
Understanding the changing role of central banks and their recent novel policies is essential for analysing many economic and financial issues, ranging from financial regulation and crisis, to ...exchange rate dynamics and regime changes, and QE and prolonged low interest rates. This book features contributions by the world's leading experts on central banking, providing in accessible essays a fascinating review of today's key issues for central banks. Luminaries including Stephen Cecchetti, Takatoshi Ito, Anil Kashyap, Mervyn King, Donald Kohn, Otmar Issing and Hyun Shin are joined by Charles Goodhart of the London School of Economics and Political Science, whose many achievements in the field of central banking are honoured as the inspiration for this book. The Changing Fortunes of Central Banking discusses the developing role of central banks in seeking monetary and financial stabilisation, while also giving suggestions for model strategies. This comprehensive review will appeal to central bankers, financial supervisors and academics.
This article introduces a unique and hand-collected dataset on cross-border exposures of 61 European banks. Getting a complete overview of the cross-border positions of European banks is challenging, ...as there are no regular reporting standards for banks’ foreign exposures split by country. Most studies therefore rely on data on banks’ foreign subsidiaries. This however leads to a significant underestimation of banks’ cross-border positions. We collect data from annual reports and other public sources for the period 2010-2017 in order to construct a dataset covering the complete cross-border exposures by banks. The dataset is valuable to academic researchers in finance and economics as well as central banks interested in financial globalization. The data are collected at the individual bank-level, and this provides opportunities for researchers aiming to analyse the impact of banks’ strategic decisions 1. Lastly, since the cross-border exposures are split by host country the data can be used in gravity models, since it provides a measure of connectedness between banks and/or countries.
Decision Rules for Corporate Investment de Adelhart Toorop, Reinier; Schoenmaker, Dirk; Schramade, Willem
International journal of financial studies,
03/2024, Letnik:
12, Številka:
1
Journal Article
Recenzirano
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We investigate the decision rules for corporate investment by designing a company value frontier. This company value frontier allows for balancing the financial value and social and environmental ...impacts. This article develops novel value concepts—ranging from shareholder value to shareholder welfare and integrated value—resulting in varying preferences for social and environmental impacts or values. Next, these preferences are incorporated in investment decision rules. The traditional net present value (NPV) rule optimises only the financial value. We propose a new integrated present value (IPV) decision rule that includes a preference for social and environmental values without neglecting the financial value. By applying the new IPV rule, responsible companies are able to achieve more sustainable outcomes.
The financial trilemma states that financial stability, financial integration and national financial policies are incompatible. Any two of the three objectives can be combined but not all three; one ...has to give. This paper develops a model to underpin the financial trilemma.
► The financial trilemma states that financial stability, integration and national policies are incompatible. ► The paper models the resolution of international banks. The non-cooperative equilibrium dominates. ► The financial trilemma is in particular applicable to the European financial system.
We jointly model green and regular bond markets. Green bonds can improve allocative efficiency and lower financing costs for green projects, but economies of scale, like liquidity fragmentation, may ...cause friction. Consequently, profitable and welfare-enhancing projects, green and brown, can be rationed in equilibrium. Rationing green projects happens with a shortage of climate investors, large non-monetary offsets, and/or costly fragmentation. Rationing regular projects can happen with a shortage of regular investors, but also with an abundance, when more profitable green projects crowd out regular ones. We propose an alternative security design that preserves green earmarking but prevents fragmentation.
Investing for long-term value creation Schoenmaker, Dirk; Schramade, Willem
Journal of sustainable finance & investment,
10/2019, Letnik:
9, Številka:
4
Journal Article
Recenzirano
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In the transition to a sustainable economy, companies are increasingly adopting the goal of long-term value creation, which integrates financial, social and environmental value. However, ...institutional investors struggle to invest for long-term value creation and perform the social function of finance. Traditional investment approaches, based on the neo-classical paradigm of efficient markets and portfolio theory, only capture financial value in their financial risk and return space. Attempts at ESG integration are typically too shallow to overcome this problem. In this paper, we examine the set of issues that make this problem so stubborn and we outline the contours of an alternative paradigm, based on adaptive markets, that is better able to pursue long-term value creation. This long-term investment approach includes short investment chains, active management that assesses companies' transition preparedness, concentrated portfolios, and deep engagement.
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