financial crisis: will we ever learn? - xavier vives (iese)
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Roundtable on Lessons from the financial crisis: how much longer until the end of the crisis? Barcelona GSE Summer Forum Barcelona Graduate School of Economics June 21, 2013 http://www.barcelonagse.eu/summer-forum.htmlTRANSCRIPT
Lessons from the financial crisis: how much longer
until the end of the crisis?
Xavier VivesIESE Business School
June 2013
VIX: Fear index(Jun. 19 2013)
Fuente: Yahoo Finance.
2008 Lehman Brothers
failure
2010 -SovereignDebt Crisis
Financial crisis
Proportion of countries with banking crises: 1900-2008
Weighted by their share of world income
World War I
The Panic of 1907
The Great Depression
The First Global Financial Crisisof 21st Century
Emerging Markets, Japan, the Nordic Countries, and US (S&L)
Perc
ent o
f cou
ntrie
s
Source: Figure 1 in Reinhart & Rogoff (2008), “Banking Crises, An Equal Opportunity Menace”, NBER WP 14587.
Will we ever learn?
Context of the crisis
Is the current crisis similar or not to past crises?
Bank panic in October 1907
Bank panic in October 2007
The saviors
J.P. Morgan
Summary diagnose
Regulatory failure and the crisis
Source: Adrian-Shin (2010)
The weight of historyCapital ratios for UK and US banks
Source: Banking of the State, Bank of England, Nov 2009. (FT Lex, Jan 23, 2010)
Source: Adrian-Shin (2010)
Managing liquidity orcontrolling solvency?
• Great Depression– Lack of attention to liquidity (Friedman and
Schwartz)• Great Recession
– Lack of attention to solvency?• European banking problems are liquidity problems• Draghi’s put and the euro fragility as a self-fulfilling
crisis– Why are banks not lending?
Principles for financial reform
The future of the euroor how long Draghi’s magic will work
VIX(Jun. 19 2013)
Fuente: Yahoo Finance.
2012 JulyDraghi
«ECB Will Do What’s Needed toPreserve Euro»
2008 Lehman Brothers
failure
2010Greece Bailout
2011 MayECB bails
out Portugal
2011 Greek default
probability increases
2012 Greeks vote in a general
election rejecting the country's bailout
agreement with the EU and IMF
Banking union
Spain
‐105‐95‐95
‐86‐62‐62‐61
‐35‐26
‐11‐8
912
3137
66127
‐150 ‐100 ‐50 0 50 100 150
PortugalSpain
GreeceIreland
SlovakiaEstoniaCyprus
SloveniaItaly
FranceAustriaMalta*Finland
NetherlandsGermanyBelgium
Luxembourg
Net foreign position relative to GDPEnd of June 2011
*End of December 2010.Source: Eurostat, Ifo Institute calculations.
% of GDP in 2011