Financial Stability – Concepts, Institutions and Regulation, History
Tuesday, 17.10-19.10, Sala Belvedere
Administrative Assistant: Olga Lupu
6, 13, 20, 27 October, 3, 17, 24 November, 1, 8, 15 December
Financial Stability rests on four main pillars: (i) Monetary stability (currency), (ii) stability of credit institutions (and the credit system), (iii) stability of capital markets, and (iv) budgetary stability (state budgets). At the same time, stability implies the possibility of instability, even catastrophic instability. History is rich in such examples. These four pillars are related to each other, and this became particularly visible during the financial crisis of 2008 and the Euro crisis of 2011, as well as with the regulatory responses provided to them. They appear especially related today (and the topic so timely), because the European Central Bank has been responsible for monetary stability since 1999/2002, without influence on the member states’ budget; then from November 2014, with the “European Banking Union”, it has become responsible for banking supervision (in the Eurozone) and thus for the stability of credit institutions (and the credit system); and now, the project on the EU agenda is to add a “European Capital Market Union”, again with a heavy involvement of the European Central Bank (and other EU institutions/agencies). In all this, budgetary stability has played a key role: in history, it is linked with episodes of inflation (even hyperinflation) or vice-versa; the link between state budget (bail-out of banks) and banks’ own funds (with savings banks investing too heavily in state bonds) has been highly influential in (co)triggering the Euro crisis and therefore also legislative reform, namely with the European Banking Union; and finally the ruinous World Economic Crisis of 1929 was triggered if not caused by a stock exchange crash (“Black Friday”), and vastly aggravated by the austerity measures dictated by adherence to the gold standard, with disastrous political consequences.
The seminar is interdisciplinary in essence, drawing mainly on insights from law (primarily regulation), history and economics. The seminar is arranged around the first three “pillars” and will discuss two particularly meaningful and paradigmatic core themes in each of them . The following themes have been selected: (i) Monetary (in)stability – a) External stability (foreign exchange), b) Internal stability (mainly Euro stability); (ii) Stability of credit institutions and the credit system – a) Central Banks and Banking Regulation and Supervision (the interplay), b) Own funds requirements and supervision of internal banking organization (such as remuneration strategy and dividend policy); (iii) capital market stability – a) The (project of a) Capital Market Union (invited speaker), b) Efficiency, stability and innovation in capital markets. The seminar will devote three sessions to each “pillar” (with the two main themes named), typically with two texts on historical developments and two texts on concepts and regulation – to be read by all participants, with a short presentation by one or two researchers. The last session will be a wrap-up session in which we summarize what we have seen, mainly by exploring the links between the stability mechanisms discussed for the first three “pillars” and budgetary stability (“pillar 4”).
A link to the online registration form will be available here on 7 September 2015 and will remain open until 25 September 2015.