Financial Stability and Central Banks: A

This book offers an overview of present day thought on the very topical subject of financial stability and central banking. The papers, written by leading researchers, provide a highly informed account of contemporary policy issues and explore the legal, regulatory, managerial and economic issues that affect central banks.

List of Charts

x

List of Tables

xi

Contributors

xii

Foreword

xiii

Sir Edward George

Acknowledgments

xvi

Financial stability and central banks: an introduction

1

(18)

Peter Sinclair

Background

1

(1)

Summary of the volume

2

(5)

Twelve questions about financial stability

7

(1)

Financial crises and the morbidity of banks

8

(1)

Competition and Safety

9

(4)

The links between financial stability policy and monetary policy

13

(2)

Bakers and firefighters

15

(2)

Conclusions

17

(2)

Financial stability and the central bank: international evidence

19

(60)

Juliette Healey

Introduction

19

(1)

The evolution of responsibilities

20

(4)

The current spectrum of central bank financial stability activities

24

(43)

Monetary policy independence and central bank responsibility for prudential regulation and supervision - conflict or synergy?

67

(7)

Key issues in establishing an effective regulatory institutional structure

74

(1)

Conclusions

75

(4)

The organisational structure of banking supervision

79

(28)

Professor Charles Goodhart

Introduction

79

(4)

Arguments for separation

83

(8)

Arguments for unification

91

(5)

Are the issues the same in emerging countries?

96

(5)

Conclusions

101

(6)

Alternative approaches to regulation and corporate governance in financial firms

107

(37)

David T. Llewellyn

Introduction and issues

107

(4)

The experience of banking crises

111

(1)

The regulatory regime

112

(2)

Components of a regulatory regime

114

(22)

Differentiations in the regime

136

(2)

Shifts within the regulatory regime

138

(4)

Assessment

142

(2)

Bank capital requirements and the control of bank failure

144

(22)

Richard A. Brealey

Introduction

144

(2)

Causes and Consequences of banking crises

146

(3)

Capital requirements

149

(1)

Bank risk and capital requirements

150

(5)

The cost of bank capital requirements

155

(3)

Asset valuation

158

(2)

Conclusions

160

(6)

Crisis management, lender of last resort and the changing nature of the banking industry

166

(21)

Glenn Hoggarth

Farouk Soussa

Introduction

166

(1)

Justification for central bank involvement in financial crises

166

(1)

Crisis prevention - the financial safety net

167

(1)

Lender of penultimate resort - private sector solutions

168

(2)

Lender of last resort (LOLR)

170

(4)

Terms and conditions for LOLR

174

(3)

Crisis management, consolidation and the changing nature of the banking industry

177

(3)

Conclusion

180

(7)

Case study - UK small bank crisis 1991-2

182

(2)

Case study - Barings, February 1995

184

(3)

International capital movements and the international dimension to financial crises

187

(34)

Peter Sinclair

Chang Shu

Introduction

187

(1)

Capital movements across the exchanges: curse or blessing?

187

(11)

Financial crises and capital movements

198

(10)

Capital controls in practice

208

(11)

Concluding remarks

219

(2)

Some concluding comments

221

(4)

Alastair Clark

Appendix 1 Minutes of the Bank of England's 7th Central Bank Governors' Symposium (2 June 2000)

225

(7)

Appendix 2 Central Bank Governors' Symposium participants

232

(5)

References

237

(15)

Index

252

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Financial Stability and Central Banks: A Global Perspective

Summary

Table of Contents

Supplemental Materials