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.