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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 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.
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.
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.
At Bangor there is an extensive tradition of empirical research addressing the long standing public-policy concern of balancing banking sector market power with regulation. The impact of Professor Molyneux's research during 2008-2013 has been to inform policy formulation surrounding the debate about bank monopoly behaviour and its links to industry efficiency. In particular, his empirical analysis has focused on the use of non-structural (price-cost or/and price-revenue relationships) and structural (concentration ratio) measures of competition (and their links to cost and profit efficiency and various risks). Evidence of the impact and scope of this research is found in the extensive use of these measures in publications by, and policy debate within, a variety of financial organizations at the national, European and international level.
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.
Based on research at UWE into mobile banking regulation, telecoms companies have been able to contribute to growth in these emerging markets internationally. The UWE findings have enabled them to understand the anti-money laundering (AML) and banking regulation implications of their mobile banking initiatives, giving them confidence and competitive advantage in negotiations by being fully versed in the local and international implications associated with mobile money and AML banking regulation. As a result, the France Telecom Group (FTG) has been able to successfully launch new subsidiaries in Tunisia, Niger, Armenia and Uganda which, by bringing mobile money services to new markets, has had a significant impact on local economies and employment.
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.
LSE research on endogenous risk has had impact at both the macro and micro level. At the macro level, it provided input for the design of the counter-cyclical measures and systemic risk surcharges in the Basel III regulations in financial markets. It also provided a significant input to the G20 agenda on financial stability. At the micro level, the research has had a significant role in shaping the thinking and recommendations of the UK Foresight Report on "The Future of Computer Trading in Financial Markets". Through this, the work had a direct impact on Markets in Financial Instruments Directive (MiFID) II, the EU legislation that governs how EU financial service markets operate. The original EC proposal for trading halts in volatile markets — Minimum Resting Times (MRT) — to regulate high frequency trading was dropped and the Foresight proposal of time stamps based on synchronised atomic clocks across trading venues was adopted.