Which banks hedge their risky investments? A new paper shows a positive correlation between the level of capital a bank has and how willing they are to hedge their investments.
The New York Times editorial board came out in support of higher capital requirements. This could be an important opportunity to find transpartisan support for an important macroprudential policy.
News and Commentary
Matteo Benetton took to Pro-Market to explain why some capital regulation is anti-competitive. Current efforts to increase global capital have allowed large firms to exploit their information advantage over smaller firms.
The Wall Street Journal looked at why large banks are working harder to finance deals that would’ve been too small for their interest in the past. As the economy slows down, smaller banks are being choked out of the merger market as big banks become less picky.
The Chamber of Commerce polled their bank members on the state of financial regulation. They found the medium and small sized banks feel especially restrained by current laws, but have grown more optimistic as various provisions of Dodd-Frank have been scaled back.
The Federal Reserve is proposing a new rule that would prohibit any one bank from purchasing too much of the debt that systemically important banks are required to issue under TLAC rules.
What’s behind the historically high levels of corporate default that we are seeing today? New research points to the more rapid disruption in today’s economy.
While it has many benefits, monetary policy isn’t the most effective mechanism to promote financial stability. Instead, macroprudential policy should be the primary vehicle used.