Safeguarding financial stability : theory and practice / Garry J. Schinasi.

Format:

Book

Author/Creator:

Schinasi, Garry J.

Contributor:

International Monetary Fund.

Language:

English

Subjects (All):

Finance.

Banks and banking, Central.

Risk.

Physical Description:

xv, 311 pages : illustrations ; 23 cm

Place of Publication:

Washington, DC : International Monetary Fund, [2006]

Summary:

Safeguarding Financial Stability explicates why financial stability matters, what it means, and the challenges in securing it," according to Gerard Caprio, Jr. from the World Bank. "[It is] a thoughtful and thought-provoking volume that is a must read not just for central bankers but for all concerned with financial stability." "Safeguarding Financial Stability represents a brilliant attempt to provide solid and updated foundations to policies aiming at financial stability," according to Tommaso Padoa-Schioppa, Executive Board Member, 1998-2005, European Central Bank. "The book is based on a thorough acquaintance with the literature, understanding of the real world, analytical skill, sense of the policy issues, familiarity with the diversity of country situations, and good judgement. The book can be already considered as required reading for anyone interested in the subject of financial stability.

Contents:

2 Money, Finance, and the Economic System 27

3 Public Policy Aspects of Finance 43

4 Efficiency and Stability 67

Part II Toward a Framework for Financial Stability

5 Defining Financial Stability 77

6 A Framework for Financial Stability 98

7 The Role of Central Banks in Ensuring Financial Stability 134

Part III The Benefits and Challenges of Modern Finance

8 Challenges Posed by the Globalization of Finance and Risk 153

9 Systemic Challenges Posed by Greater Reliance on Over-the-Counter Derivatives Markets 181

10 The Market for Credit Risk Transfer Vehicles: How Well Is It Functioning and What Are the Future Challenges? 228

11 Systemic Implications of the Financial Market Activities of Insurance and Reinsurance Companies 245

12 Ongoing National and Global Challenges 271

1.1 Changes in Key Financial Aggregates 4

1.2 Distribution of Financial Sector Mergers and Acquisitions, 1991-1999 9

1.3 Cross-Border Transactions in Bonds and Equities 10

1.4 Outstanding International Debt Securities by Nationality of Issuer 11

1.5 Exchange-Traded Derivative Financial Instruments: Notional Principal Amounts Outstanding and Annual Turnover 12

1.6 Market Turbulence and Crises in the 1990s and Early 2000s 13

2.1 Finance as a Temporary Exchange of Services 33

2.2 Relative Values of Services 34

3.1 Typology of Benefits from Goods, Based on Characteristics of the Goods 52

6.1 Source of Risk to Financial Stability 107

6.2 IMF Financial Soundness Indicators: Core and Encouraged 112

6.3 Policy Instruments for Financial Stability 116

8.1 Cross-Border Transactions in Bonds and Equities 154

8.2 International Equity Issues by Selected Industrial and Developing Countries and Regions 156

8.3 Outstanding International Debt Securities by Nationality of Issuer for Selected Industrial and Developing Countries and Regions 158

8.4 Major Industrial Countries: Bank Deposits of Commercial Banks 161

8.5 Major Industrial Countries: Bank Loans of Commercial Banks 161

8.6 Major Industrial Countries: Tradable Securities Holdings of Commercial Banks Assets 161

8.7 Major Industrial Countries: Financial Assets of Institutional Investors 162

9.1 Top 20 Derivatives Dealers in 2004 and Their Corresponding Ranks in 2003 186

9.2 Global Over-the-Counter Derivatives Markets: Notional Amounts and Gross Market Values of Outstanding Contracts by Counterparty, Remaining Maturity, and Currency 188

11.1 Life Insurance: Premium Growth Rates 256

11.2 Profitability Decomposition of Major Nonlife Insurance Markets 258

1.1 Composition of Key Financial Aggregates in 1970 and 2000 6

1.2 Growth of Key Financial Assets, 1970-2004 7

1.3 Financial Sector Mergers and Acquisitions, 1990-1999 8

2.1 Evolution of Modern Finance 41

4.1 Private Demand and Supply Equal to Social Demand and Supply 68

4.2 Private Marginal Benefit Below Social Marginal Benefit 69

4.3 Private Marginal Cost Below Social Marginal Cost 70

4.4 Stable Disequilibrium 71

6.1 Stylized View of Factors Affecting Financial System Performance 103

6.2 Framework for Maintaining Financial System Stability 105

9.1 Structure of OTC Derivatives Markets, End-December 2003 202

10.1 Global Credit Derivatives Market Size and Structure 229

10.2 Key Characteristics of Credit Derivatives Markets 230

10.3 Spread Between Credit Derivatives Premium and Underlying Bond Spread 241

11.1 Shares of Total Financial Assets of Institutional Investors and Banks: United States and Japan 247

11.2 Shares of Total Financial Assets of Institutional Investors and Banks: Selected Euro Area Countries and the United Kingdom 248

11.3 Holdings of Financial Securities by Insurance Companies and Banks 249

11.4 Holdings of Securities Relative to Market Size 250

11.5 United States: Corporate and Foreign Bonds 252

11.6 Balance Sheet Assets of Insurance Companies: United States and Japan 253

11.7 Balance Sheet Assets of Insurance Companies: Selected Euro Area Countries and the United Kingdom 254

11.8 Global Insurance Industry Results 255

11.9 Nonlife Insurance: Combined Ratios in the Industrial Countries 259

3.1 Prisoner's Dilemma 44

3.2 Sources of Market Failure in Finance 49

3.3 Samuelson's Store of Value as a "Social Contrivance" Providing a Public Good 62

6.1 Remedial Action: Dutch Housing Market Boom in the 1990s 117

6.2 Crisis Resolution: Terrorist Attacks on September 11, 2001 119

9.1 The Role of OTC Currency Options in the Dollar-Yen Market 192

9.2 Long-Term Capital Management and Turbulence in Global Financial Markets 196

9.3 The Role of Derivatives in Crises in Emerging Markets 198

9.4 Sources of Legal Uncertainty in the U.S. Regulatory Environment 218

10.1 Financial Implications of Enron's Bankruptcy 236.

Notes:

Includes bibliographical references (pages 285-301) and index.

ISBN:

1589064402

OCLC:

62877938