The Development of International Financial Regulation and Supervision 1961-1982

Lead Research Organisation: University of Glasgow
Department Name: School of Social & Political Sciences

Abstract

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Publications

10 25 50
 
Description The research undertaken during the period of the grant explored the relationships between commercial banks, central banks and multilateral institutions to identify how the regulation and supervision of international banking developed during the period from 1965-1982 in Europe, USA and Hong Kong. This was a period of considerable financial innovation combined with systemic instability. There were several shocks to the system including the erosion of capital controls, the advent of floating exchange rate regimes, asset market volatility and commodity price shocks (especially the oil crises of 1973 and 1982). The outcomes of the research are on-going but the key findings to date include:
1. The lack of comprehensive, timely and consistent data on international banking and particularly the accumulation of sovereign debt by less developed economies arose from competition among agencies (IMF, IBRD, BIS, national supervisors and central banks) and from the reluctance of banks themselves to share their information. This resulted in an opacity that reduced the ability of lenders to measure risk. The research identified several initiatives during the 1970s that sought to improve the quality of the data, but these all foundered on the inability/unwillingness of central banks to coordinate the collection and dissemination of data and the reluctance of banks to share their data.
2. There is clear evidence of moral hazard in sovereign lending during the 1970s apparent in the meetings and correspondence between international banks and the International Monetary Fund and between US banks and the New York Federal Reserve.
3. Banks were under considerable pressure to internationalise in order to retain their competitive position in rapidly growing markets, but they were ill equipped to establish the internal governance structures that would support such an extension. The project identified cases of rogue trading and other forms of fraud that contributed to instability in international banking markets, particularly in a near-miss international banking crisis in 1974.
4. During the 1970s there was a rapid increase in the number of non-bank financial intermediaries that were outside the regulatory and supervisory framework for existing authorities and this increased the fragility of the banking system through several channels.
5. The initial meetings of the Basel Committee established in 1975 to improve the supervision of the international banking system showed the resistance to innovation, the limits to coordination and the inconsistency of national supervisory systems among the G10 (plus Switzerland and Luxembourg) central banks. This helps to explain why there were no appropriate safe-guards in place before the onset of the Latin American sovereign debt crisis of 1982.
Exploitation Route The research undertaken has generated some data on Hong Kong's banking system which have been deposited for public use.

Further research on European and Japanese banks will increase robustness of the results.
Sectors Financial Services, and Management Consultancy,Government, Democracy and Justice

URL http://www.bank-reg.co.uk
 
Description The research on the development of prudential supervision and regulation and the evolution of the global financial system has been shared with academics, central bankers and commercial bankers in a range of countries through workshops, conferences and seminars including at the United Nations General Assembly, International Monetary Fund, Hong Kong Monetary Authority, Chatham House, Bank for International Settlements and the Bank of England. The research has also been disseminated to the public through publications by the Centre for International Governance Innovation, Gailfosler llc, Wall Street Journal, The Conversation, World Financial Review. Highlights include 1. I was invited to share my research on international economic and financial reform in an address to the General Assembly of the United Nations in December 2014. I was then part of a panel of 4 (representing the IMF, Financial Stability Board, Bank of Thailand) in a 3 hour Q&A session. This session forms part of the UN reform of the millenium development goals that will be discussed at Addis Ababa Accord on Financing for Development in July 2015. 2. In January 2015 I was a co-organiser of a high level symposium at the International Monetary Fund in Washington DC on Macroeconomic Coordination. My co-organiser was the Assistant Director, and Chief, Systemic Issues Division, in the Research Department of the International Monetary Fund. The symposium included participants from academic institutions in Europe and the USA as well as IMF staff and consultants. I was also able to meet with the IMF Chief Economist to discuss my research.
First Year Of Impact 2010
Sector Financial Services, and Management Consultancy,Government, Democracy and Justice
Impact Types Policy & public services

 
Description Address to United Nations General Assembly, New York and 3 Hour Q&A
Geographic Reach Multiple continents/international 
Policy Influence Type Gave evidence to a government review
URL http://www.un.org/esa/ffd/wp-content/uploads/2015/01/FfD_SubInfSessions_Dec_Informal-Summary.pdf
 
Description Advisor to Gailfosler llc
Geographic Reach North America 
Policy Influence Type Participation in a advisory committee
 
Description Lecture to Bank of England Centre for Central Banking Studies
Geographic Reach Multiple continents/international 
Policy Influence Type Influenced training of practitioners or researchers
 
Description University of Glasgow Columbia University Travel Scheme - Early Career Visiting Fellow
Amount £2,000 (GBP)
Organisation University of Glasgow 
Sector Academic/University
Country United Kingdom
Start 09/2013 
End 10/2013
 
Title Hong Kong Bank Balance Sheet Data 1962-1972 
Description  
Type Of Material Database/Collection of data 
Year Produced 2014 
Provided To Others? Yes  
 
Title Weekly Gold Market Prices in Hong Kong 1962-1972 
Description  
Type Of Material Database/Collection of data 
Year Produced 2014 
Provided To Others? Yes  
 
Description Chatham House Task Force on Role of Gold in the International Monetary System 
Organisation Chatham House
Country United Kingdom 
Sector Public 
PI Contribution This task force met several times and produced a report. I participated in the discussions and helped to edit/write the final report.
Collaborator Contribution The task force included academics and business representatives as well as from teh Chinese Academy of Social Sciences. Chatham House hosted the meetings in London and published the final report.
Impact Gold and the International Monetary System: Chatham House Report, February 2012
Start Year 2012
 
Description Norges Bank Bicentenary Project 
Organisation Norges Bank
Country Norway 
Sector Private 
PI Contribution Norges Bank has commissioned an edited volume from leading global scholars to celebrate its Bicentenary to be published by Oxford University Press. I am participating, wrote a chapter (in collaboration with a colleague Tobias Straumann from University of Zurich) and attended the inaugural international conference in Geneva.
Collaborator Contribution Norges Bank provided editorial support, publication costs and support for ravel to the conference.
Impact Schenk, C., and Straumann, T. (2016) Central banks and the stability of the international monetary regime. In: Bordo, M. D., Eitrheim, Ø., Flandreau, M. and Qvigstad, J. F. (eds.) Central Banks at a Crossroads: What Can We Learn from History? Series: Studies in macroeconomic history. Cambridge University Press, pp. 319-355. ISBN 9781107149663
Start Year 2013
 
Description Banking Union for Europe: Burden or Benefit? 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Type Of Presentation workshop facilitator
Geographic Reach International
Primary Audience Industry/Business
Results and Impact Lunchtime Round Table for media and bankers in Frankfurt, Germany: Chaired by Catherine Schenk, hosted by European Association for Banking History
Chiara Zillioli, Deputy Chief Counsel ECB
Dirk Schumaker, Senior European Economist at Goldman Sachs International
Karl Cordewener, Deputy Secretary-General, Basel Committee on Banking Supervision
Kern Alexander, Professor of Law and Finance at University of Zurich

The recent banking crisis highlighted the need for swift and decisive action by EU-level funding arrangements. As the European Central Bank (ECB) takes over its role as Single Supervisory Authority in the Euro-zone, there is an opportunity to take stock of current developments in international financial regulation and supervision, and provide insights into possible future directions. This round table discussed these developments in their wider context, their impact on the real economy, and the pros and cons for the different stakeholders. The discussion will offer an interdisciplinary perspective, across law, history and economics, and involve both, academics and policy-makers. What is the role of the Basel Committee on Banking Supervision in current debates? What are the main challenges that the ECB will face as Single Supervisory Authority? What are the prospects and limits of creating a European banking union? Which lessons can be drawn from previous efforts to harmonise European banking?

Reported in the press
Year(s) Of Engagement Activity 2014
 
Description C.R. Schenk, 'Gold as a Money Anchor: we have been here before', 
Form Of Engagement Activity A magazine, newsletter or online publication
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Professional Practitioners
Results and Impact Briefing note for GailFosler Group LLC, September 2011, http://www.gailfosler.com/featured/gold-as-a-money-anchor-we-have-been-here-before



This note emphasises the importance of a historical understanding of global markets for assessing current trends. This briefing note was a commissioned piece based on my ESRC funded research. GailFosler LLC is a consultancy company based in the USA.

This briefing note was a commissioned piece based on my ESRC funded research. GailFosler LLC is a consultancy company based in the USA.
Year(s) Of Engagement Activity 2011
URL http://www.gailfosler.com/featured/gold-as-a-money-anchor-we-have-been-here-before
 
Description Chatham House Round Table 
Form Of Engagement Activity A formal working group, expert panel or dialogue
Part Of Official Scheme? No
Geographic Reach National
Primary Audience Professional Practitioners
Results and Impact Round Table with senior bank executives (Chief Economist of Standard Chartered, Managing Director of Deutsche Bank, Managing Director FTI Consulting) on the role of gold in the international monetary system. I spoke on the long term development of the global system and responded to questions from the floor. The audience were from London banks, media, policy-makers
Year(s) Of Engagement Activity 2012
URL https://www.chathamhouse.org/sites/files/chathamhouse/public/Research/International%20Economics/2802...
 
Description Podcast: Regulatory Coherence and the Future of Finance: Five Years After the Crash of 2008 
Form Of Engagement Activity A broadcast e.g. TV/radio/film/podcast (other than news/press)
Part Of Official Scheme? Yes
Geographic Reach International
Primary Audience Public/other audiences
Results and Impact Podcast:
Catherine Schenk in Conversation with Iain MacNeil
This podcast was recorded by Chatham House as part of the Conference organised by Schenk and MacNeil on international financial regulation. In an interview, Schenk discusses the importance of the historical dimension to understanding the current obstacles to effective international regulatory reform.

This podcast was recorded by Chatham House as part of the Conference organised by Schenk and MacNeil on international financial regulation. In an interview, Schenk discusses the importance of the historical dimension to understanding the current obstacle
Year(s) Of Engagement Activity 2013
URL http://www.chathamhouse.org/events/view/195671
 
Description Regulatory Coherence and the Future of Finance: Five Years After the Crash of 2008 
Form Of Engagement Activity Participation in an activity, workshop or similar
Part Of Official Scheme? No
Type Of Presentation keynote/invited speaker
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact Participants

Charles Goodhart, Director, Financial Regulation Research Programme, Department of Financial Markets Group, London School of Economics

Iain MacNeil, Alexander Stone Chair of Commercial Law, School of Law, University of Glasgow

Paola Subacchi, Research Director, International Economics, Chatham House

Eugene White, Professor of Economics, Department of Economics, Rutgers University

Steven Schwarcz, Stanley A Star Professor of Law and Business, Duke University

Chair: Catherine Schenk, Professor of International Economic History, University of Glasgow



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Type: Research and other events



This conference addressed the issues of coherence and innovation in the regulatory response to the financial crisis. The speakers will discuss issues such as the objectives and techniques of financial regulation in a post-crisis world; the changes to the institutional structure of regulation at the national, regional and global level; the evolution in the nature and control of systemic risk; as well as the role of enforcement in responding to the financial crisis.



This event is organized in partnership with the University of Glasgow and with the support of the Economic and Social Research Council (ESRC).

Subsequent engagement with Chatham House
Year(s) Of Engagement Activity 2013
URL http://www.chathamhouse.org/events/view/195671
 
Description Reinventing Bretton Woods Committee, Hangzhou, China 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Industry/Business
Results and Impact The Reinventing Bretton Woods Committe meeting in Hangzhou China in May 2014 attracted central bankers, bankers, academics, Chinese government, representatives from the IMF, the Bank for International Settlements and international think tanks. I gave a presentation to the plenary session and participated in discussion thereafter. The theme was China in the International Monetary System
Year(s) Of Engagement Activity 2014
URL http://www.reinventingbrettonwoods.org/event/china-international-monetary-system
 
Description Visiting Fellow, Hong Kong Institute for Monetary Research: 2 seminars 
Form Of Engagement Activity A talk or presentation
Part Of Official Scheme? No
Geographic Reach International
Primary Audience Policymakers/politicians
Results and Impact I was visiting fellow at the Hong Kong Institute for Monetary Research April-May 2014 and gave a seminar paper to Hong Kong Monetary Authority staff and at the Hong Kong University Law School where participants from banks attended.
Year(s) Of Engagement Activity 2014