Understanding the role of banks in cross-border finance has become an urgent priority. Cross-border banks have played a central role in the dynamics of the global crisis of 2007-2009. First, European banks had a surprisingly large exposure to the US securitised asset markets, which arose to a significant extent through global banks acting either on the buying or selling side in these markets. Second, the breakdown in credit and asset markets was an international phenomenon, with cross-border linkages suffering disproportionately due to greater information problems vis-à-vis cross-border counterparties and the differences in regulatory regimes. Third, currency mismatches in funding became evident, with European banks suffering a dollar shortage that ultimately required resolution through a major currency swap initiative among the main central banks. Fourth, the provision of fiscal support for distressed banks was especially problematic in relation to cross-border activities. The rescue of multi-country banks, such as Dexia and Fortis, required the governments involved to devise ad hoc, ex-post burden-sharing agreements. In relation to emerging Europe, there were also fears that the policies of home-country governments might encourage parent banks to fail to support the operations of affiliates. This report analyses key aspects of cross-border banking, takes a European focus and derives policy recommendations based on them. Chapter 1 of the report first documents the evolution of cross-border banking in Europe in the two decades prior to the crisis. We then turn to the role cross-border banking played during the crisis of 2007-2009, with a key focus on whether crossborder activities have exacerbated the crisis or helped to mitigate it. We also analyse the regulatory response to cross-border problems in the crisis.

The European University Institute and the Wharton Financial Institutions Center held a conference in Florence, Italy in April 2011 that brought together leading economists, lawyers, historians and policy makers to discuss the current economic situation in the Eurozone with particular emphasis on the issue of sovereign default. This book summarizes the views presented there. The first part considers the current situation including the situations in Greece, Ireland, Portugal, Spain, the German constitution, EU law, the constraints on the ECB to buy up Eurozone government debt, and the European Financial Stability Fund. The second part covers how Eurozone sovereign bankruptcy might work, including collective action clauses, banking regulation given risky sovereign debt, the prevention of banking crises, and the sovereign equivalent of debtor-in-possession financing. The final part considers alternatives to sovereign bankruptcy including the possibility of leaving the Eurozone temporarily, an historical comparison of suspension of the Gold Standard, Argentina and other recent defaults, and the long run solution of Eurozone wide bonds and fiscal authority.

Explains how and why financial innovation drives economic growth and presents specific solutions to our most pressing economic challenges.--Shows how modern financial instruments and capital structures can be used to expand prosperity and unleash valuable new ideas.-Explains how financial innovation can go wrong, and how to keep that from happening.-Helps entrepreneurs, development specialists, and policymakers develop realistic financial strategies for raising more capital at better terms with lower cost. Financial innovation has become crucial to driving global economic growth and improving society, but, as the past few years have demonstrated, when financial innovation is misunderstood or mismanaged, it can have disastrous consequences. in this practical, accessible book, two renowned experts explain how sophisticated capital structures can enable companies and individuals to raise capital in larger amounts for longer terms and at lower cost, bridging capital gaps and accomplishing tasks that would otherwise be impossible. They outline the background and history of financial innovation, showing how new instruments have evolved, and how they have been used and misused. They thoroughly demystify complex capital structures, presenting a practical toolbox for anyone who needs to raise capital for either private or public purposes. Readers will learn why capital structure matters; how to analyze capital structures; and how to avoid the potentially catastrophic pitfalls of financial innovation. The authors present clear, thorough discussions of the current role of financial innovation in capitalizing business, housing, cities, regions, nations, and new ideas. They conclude with a full chapter of crucial 'lessons learned' in financing the future. This is the first book in a new series on financial innovation that is a collaboration between Wharton School Publishing and Milken Institute. Future titles will focus on specific policy areas such as health care and energy.