1 / 31

Howard Davies Director, LSE

With the Benefit of Hindsight… lessons from the credit crisis for banks, regulators and central banks. Howard Davies Director, LSE. Singapore 10 th November 2008. Act One: Subprime. Case-Schiller Home Price Index 2000-2008. Source: Wikipedia. Mortgage Origination by Product (%). Notes:

santos
Download Presentation

Howard Davies Director, LSE

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. With the Benefit of Hindsight… lessons from the credit crisis for banks, regulators and central banks Howard DaviesDirector, LSE Singapore 10th November 2008

  2. Act One: Subprime

  3. Case-Schiller Home Price Index 2000-2008 Source: Wikipedia

  4. Mortgage Origination by Product (%) • Notes: • Total mortgage origination excludes seconds and home equity lines of credit • For relative growth versus 2001, 2007 annualized based on 9 months of date

  5. Recent ABX BBB Price History Price Source: Markit Partners

  6. Resecuritisation Capital Structure Containing Subprime Loans Subprime Mezzanine CDO Containing BBB Subprime Bonds 100% 100% 11% SUPER SENIOR AAA CUMULATIVE LOSSES 8.6% 40% AAA AA A BBB Equity 28% 20% 11% 11% 7% 7% 7% 0% 0%

  7. Act Two: Liquidity

  8. Sources: Bloomberg and Bank calculations

  9. Act Three: Unravelling • Bear Stearns, Indymac, Wa mu • HBOS, RBS • Fortis, Dexia etc.

  10. Act Four: Meltdown

  11. Act Five: Pumping

  12. The Credit Crisis: A Five-Act Tragedy Act One: Subprime Act Two: Liquidity Act Three: Unravelling Act Four: Meltdown Act Five: Pumping

  13. EU Growth Rates: IMF Forecasts

  14. European Commission Forecasts

  15. Source: www.ft.com

  16. Five Ways • Legitimacy – why Luxembourg and not China?

  17. Global Committee Structure - A Regulator’s View G-7 (Gov’ts) IMF World Bank (Gov’ts) OECD (Gov’ts) WTO FATF (Money Laundering) IASB (Accounting IASC Financial Stability Forum IAASB (Audit) PIOB Monitoring Group Bank for International Settlements (Central Banks) G-10 (Central Banks) Basel (Banking) IOSCO (Securities) IAIS (Insurance) IFIAR (Audit) Source: Adapted with permission from Sloan and Fitzpatrick in Chapter 13, The Structure of International Market Regulation, in Financial Markets and Exchanges Law, Oxford University Press, March 2007 CGFS CPSS Joint Forum

  18. Five Ways 2. Simpler, co-ordinated mechanisms which better reflect the shape of today’s markets

  19. National Regulatory Structures 57 3 Other bank regulators 49 Central Bank 10 35 Central banks as banking regulator No Central Bank interest 7 54 Non-Central Bank 39 28 Central bank as one pillar 2 Source: How Countries Supervise their Banks, Insurers and Securities Markets 2007: Central Bank Publications

  20. Five Ways 3. Speed: Basel 2 took a decade

  21. Five Ways 4. Stronger links between macroeconomic surveillance and regulation • A new G (G12) • Standing group of Finance Ministers

  22. Five Ways 5. Political leadership

  23. Five ways to fix our Financial Architecture • Legitimacy – why Luxembourg and not China? • Simpler, co-ordinated mechanisms which better reflect the shape of today’s markets • Speed: Basel 2 took a decade • Stronger links between macroeconomic surveillance and regulation • Political leadership

  24. And outflows from emerging markets

  25. “ Bank failures are caused by depositors who don’t deposit enough money to cover the losses due to mismanagement”. Dan Quayle

  26. With the Benefit of Hindsight… lessons from the credit crisis for banks, regulators and central banks Howard DaviesDirector, LSE Singapore 10th November 2008

More Related