Why do we need stress tests? Since the financial crisis, stress tests have become the main instrument of bank supervision. In stress tests, supervision interacts with regulation and bank capital requirements. Research highlights the role of stress-test supervision in dampening the incentives of banks to take risks, especially when capital requirements are not effective.
Swiss Finance Institute
Talent does tend to follow the money, which is one reason why remunerative financial careers have lured many of the brightest and the best. Critics argue that this talent drain is a drain on the prosperity and growth of the economy, diverting the most qualified to less valuable jobs; but do statistics indicate that financial jobs may instead produce a net societal benefit?
It may come as a surprise that some investors prefer their bank managers to be honest, even if this honesty hinders maximum returns. Research indicates that truthfulness in financial dealings may actually pay more dividends than deceptive practices, thus offering banks the opportunity to act as trustworthy intermediaries and in the long run boost their overall success.
To say that a central bank is influential in determining the course of national markets and economies would be a serious understatement. But behind the central bank’s more obvious monetary policy lies its collateral policy, a hidden but key contributor to its overall, far-reaching financial impact. What exactly are collateral frameworks, and what do they really do?
Real estate continues to attract investors, especially when other investment options are shaky at best. In Europe, non-listed real estate funds offer an alternative to direct investment, involving much less capital and greater diversification. But how do these funds respond to applicable risk factors compared to the direct investments?
Private equity (PE) firms invest in the private equity of operating companies, and the strategy of secondary buyouts (SBOs), in which one PE firm sells a portfolio company to another PE firm, has grown in popularity. But along with the rise of SBOs comes concerns that the practice may diminish investor returns.
It is well known that credit booms generally end poorly and are followed by poor economic performance. But it is less clear what causes that poor performance.