Log in
Since the financial crisis of 2007-8, many failing banks have had to be rescued. Rescue has taken different forms, including acquisition by rivals, public subsidies, and nationalisation.
Research at University of Leicester contributed to the changing of perceptions on the relative merits of these options, by showing that the cost of bank nationalisation had previously been over-estimated. This work paved the way for a wave of bank nationalisations that occurred during the financial crisis of 2007-8. Demetriades directly applied the findings of his research in the rescue of the crisis-hit Cypriot banking sector, following his appointment as Governor of the Central Bank of Cyprus and member of the European Central Bank governing council in 2012.
The risk of a systemic crisis and the inability of depositors to monitor how banks are governed are long-standing public policy concerns. Since joining Bangor University in 2008 Professor Klaus Schaeck and collaborators from central banks and international financial organisations have worked to inform the global policy debate on these issues. Specifically, how varying competitive conditions, corporate governance structures and regulatory innovations incentivise the development of safer and sounder banking systems. Notable impacts of Schaeck's research since 2008 include: the use by central banks of his new methodology to gauge banking sector competition; priority change in the policy debate over the structure of bank boards and, in particular, the influence of female executives; and finally heightened policy awareness of the unintended consequences of regulations imposed on troubled or bailed-out banks.
The development and introduction of a new international regulatory framework for banking and financial markets (known as Basel III) following the 2007/8 financial crisis has been challenging for all parties. Murinde's research has helped shape the response to Basel III by banking and stock market regulators in Africa. In particular, this work has enhanced the competitiveness of the financial services sector underpinned the articulation of the African voice on the transition to Basel III as expressed at the G20 Summit in Seoul in 2010; and directly enhanced the skills and knowledge of stock exchange regulators. As a result of this impact, the African Development Bank invited Murinde to contribute directly to knowledge and capacity building in Africa, and he was subsequently appointed the first Director of the African Development Institute at the African Development Bank in May 2011, on a three-year secondment from the University of Birmingham.
The global financial crisis of 2008 required policy makers to restructure radically banking systems through re-capitalization, essentially injecting capital to the banks. The Unit's research has shown that recapitalization policy has the potential to impose significant costs on the wider economy and on the banking system in particular. This research brings this trade-off to the attention of policy-makers at central banks who will now be better informed about the nature of the associated costs. . Our research outputs enabled some of these policy-makers to decide at which point on the trade-off they might wish to locate their policy choices.
It is widely agreed that savings for funded pensions are inadequate, while pay-as-you-go schemes are unsustainable. Our research addressed determinants and adequacy of saving, and policies to alleviate the problem. This led to the team investigating the economic and fiscal impacts of extending working lives. Presentations were made at the EC, at Finance Ministries and at public fora. The Daily Telegraph front page (Your Country Needs You to Work Longer) on 5th of May 2009, discussing the work, had an impact. There was a noticeable impact on UK, Italian, and other retirement policies, and is acknowledged to have been an influence on the decision to raise UK retirement ages in 2010.
Research by the School's Centre for Finance, Credit and Macroeconomics (CFCM) on the monetary transmission mechanism has been influential in improving the design, implementation and effectiveness of the monetary policies of a number of central banks, including the Bank of England, Banque de France and the European Central Bank. The research has influenced changes in the way that official monetary aggregates are measured so as to capture the impact of non-bank financial institutions on the money supply and credit availability, and in better understanding of how monetary policy affects different interest rates. This in turn has allowed for improved control by central banks of their policy targets, and for better understanding of the effects of their monetary policies on economic activity and inflation.
Since the global financial crisis triggered by the collapse of the subprime mortgage market in the United States, a key issue for central banks has been the extent to which they should use monetary policy, along with macroprudential tools, to promote financial stability. University of Manchester (UoM) research has developed small theoretical models, and more detailed quantitative macroeconomic models, to help address this issue. This analytical work has helped to: firstly, influence the policies and operations of several major central banks (Brazil, Turkey and Morocco); and secondly, fuel the debate about global reform of bank regulation in international forums, such as the Financial Stability Board, the Basel Committee on Banking Supervision and annual meetings of central banks from Latin America. Impact has been achieved through presentations to these forums, alongside discussions with senior policymakers from other countries.
Through Community Finance Solutions (CFS), an award winning research and development unit of the University of Salford, which addresses financial and social exclusion, Improving the Sustainability of Micro-financial Institutions is focused on providing leadership in increasing the sustainability of micro-financial institutions (MFIs) that provide credit or loans to the financially excluded, demonstrating the following impact:
Equity investors have twice suffered large losses, known as `drawdowns' on their investments in the last dozen years: in 2001 and 2009. This applies to both individuals and institutions and has had an adverse effect on both individuals' living standards entering retirement and the attitude of individuals to the advantages of long-term asset accumulation. The research of Professor Andrew Clare and Professor Stephen Thomas at City University London has created commercially available investment products that offer superior risk-adjusted returns with a transparent strategy supported by published, peer-reviewed research and which avoid such large losses. They developed a simple `trend following' 'smoothing` technique to create a diversified, developed market equity fund which was launched by WAY Fund Managers in March 2011. At the start of 2013, following the success of this strategy, the researchers launched an investible index, the Cass Trend Master Index, in collaboration with Credit Suisse. This index now forms the basis of several structured products predominantly aimed at institutional investors. In April 2013 the researchers launched another set of investible indices, based on the same investment principles, with Goldman Sachs and Indexx Markets. These focus on single asset classes including equities and commodities.
The demise of Lehman Brothers in 2008 marked the start of the current financial crisis and illustrated some of the adverse consequences of linkages between banks. The prospect of systemic crises has concerned bank regulators and monetary policy authorities for many years. Research by Professor Altunbaş at Bangor Business School, in close collaboration with the European Central Bank (ECB), has had substantial impact over 2008-2013 by influencing priorities in the international policy debate on how bank innovation can influence the conduct of monetary policy. It shows that the effectiveness of traditional monetary policy transmission mechanisms (such as the bank lending channel) is reduced by securitization activity and this also exacerbates the risk-taking channel of monetary policy. Evidence of the impact and overall scope of Professor Altunbaş' research is reflected in reference to his research at the highest monetary policy levels in Europe as well as widespread recognition in official central bank and international organization publications.