Banking Solutions provides an in-depth overview and root-cause analysis of the credit crisis. Actual and actionable banking solutions are drawn from this root-cause analysis. Because any root-cause analysis of the credit crisis is heavily interlinked with the political environment, the book focuses first of all on the pros and cons of free markets. The book shows that supervision and regulation are necessary to complement the free market to establish a completely free, innovative and prosperous society with maximum individual freedom. Banking Solutions shows how easy it is for the current world to move out of the turbulence and turn the credit crisis to the good to form a more sustainable political construct.
This book provides both a tangible short-term solution for the credit crisis as well as longer-term structural solutions. With respect to the first, the author shows how the US troubled asset relief program (TARP) could have been executed effectively and would have made the US policy intervention successful. The structural solutions evolve around improved and more pragmatic regulatory policy and are presented in a clear manner. Furthermore, the book shows how a more commercial approach to supervision can better prevent market failures going forward.
Frans de Weert draws on significant investment banking
experience with Barclays Capital (London and New York) and has
written two books on financial markets. Complemented by his experience as a strategy consultant and supervisor, this enables him to oversee the entire banking sector and makes him the perfect candidate to write such a succinct book on the solutions for banking.
Preface
Acknowledgements
Part I - The free market
1 The importance of the free market
1.1 Optimal price setting
1.2 Maximum value creation across the entire chain - from idea generation to end customer
1.3 Optimal allocation of resources
2 The free market and the need for regulation
3 Society and the free market
Part II - Credit crisis
4 Overview of the credit crisis
5 Ratings of collateralised debt obligation
6 Root causes of the credit crisis
7 Factors deepening the credit crisis: Credit expansion
8 Factors deepening the credit crisis: Mark-to-market accounting
8.1 Accounting standards and associated issues for banking sector
8.2 Mark-to-market issues related to insurance companies and pension funds
9 Factors deepening the credit crisis: Capital treatment of securitisations
10 Policy intervention
10.1 Necessity of policy intervention
10.2 Pitfalls of banking nationalisations
10.3 Bad bank constructions
10.4 Overview of policy interventions
10.5 Short-term solutions
Part III - Structural solutions
11 Structural solutions for regulatory and supervisory framework
11.1 Scope of regulation and supervision
11.2 Supervision of conduct
11.3 Short sale rules
11.4 Reporting standards versus regulatory requirements
11.5 Dynamic regulatory requirements
11.6 Regulatory arbitrage
11.7 Solvency requirements for liquidity risks
11.8 Solvency requirements for securitisations
11.9 Stress testing
11.10 System supervision
12 System supervisors as safeguards of real value creation
13 Risk management in financial institutions
14 Conclusion
References