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.
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.
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.
Monetary policy and its effect on the wider economy are important for
South Africa's objective of
achieving both high economic growth and low inflation — which are deemed
to contribute to the
government's and electorate's greater objectives of reducing poverty and
The central bank (South African Reserve Bank, SARB) and the National
responsibility for both monetary policy and the oversight of the financial
sector. Laurence Harris's
research on the links between monetary policy, financial sector
development, and their connection
with the financing and investment decisions made by businesses has led
both institutions to seek
and act on his advice.
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.
Research carried out at the University of Southampton into banking,
economic growth and development has made Professor Richard Werner a
trusted source of advice for economic policy-makers at the highest level,
for example for the Financial Services Authority, the Independent Banking
Commission, the International Monetary Fund and the Bank of England.
Through articles, books and many media contributions, he has promoted a
greater public understanding of economics and the financial crisis. His
credit creation analysis has also been adopted by two investment funds in
their portfolio management, leading to financial gains for investors,
outperforming the FTSE100.
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.
This case study looks at the impact on the international finance industry
and big business of research conducted at Heythrop College by Catherine
Cowley. Cowley's work is transforming the ethical framework with which
some of the most powerful corporations in the world operate and how they
understand their role in society, as well as influencing the direction and
content of the public debate over the ethics of finance and business.