Monthly Archives: January 2012

Understanding Central Banks….

The crisis has shown us that the role of the Central Bank has rarely been more central to global economic welfare. Calls for more, or less, or faster or slower money growth, for new rounds of quantitative easing, for enhancement of the role of Central Banks as lenders of last resort (but to whom?), discussions on the desirable or undesirable role of inflation…. In this context it is essential for any business to understand what a central bank does and does not do.

Taught by Professor Karl Whelan, who has over a decade worth of experience as a central banker in the Federal Reserve and in the Central Bank of Ireland, this course delivered by my Campus Company will  examine among other issues

  • If and if so how central banks influence interest rates and the money supply.
  • Lender of last resort operations and banking regulation
  • Quantitative easing
  • How major central banks are structured, their legal limits and how they communicate (and how to decipher this)
  • Liquidity traps
  • Sovereign debt and central banks.
  • MMT (Modern monetary theory).
  • Credit risk in the Eurosystem of central banks and the correct interpretation of movements in payment systems and TARGET2.
  • The euro area crisis and scenarios for a euro break-up.

Coming when the global cental banking debate intersects with the role of the ECB/Central Bank of Ireland on the issue of the Anglo Irish Bank Promissory Notes, this course should enlighten and provide business context to these issues.

    UPDATE
      Karl presented a discussion on exceptional liquidity provisions by the Central Bank of Ireland on Friday 27 January. His slides are

here

    .

Banking : Back to the Future – presentation to the Crisis Conference

For those that were unable to make the crisis conference held today in Croke Park, please see below my slides on a possible future for banking. Note that these are suggestions and ideas : not detailed policy proposals. Theres only so much one can say in 25 minutes….

The slides re PDF and about 4mb in size as uploaded : click below then click again…

Banking slides : crisis Conference 25 Jan 2012

Where are EU-Asian economic relations now and how will these impact on business?

The rise of the Asian economies will be the dominant theme of the next decade it is now clear. Ireland exports relatively little to this area, although this is growing fast. A course on euro-asian business relations will be run by my campus company on 8-9 March, led by Professor Bernadette Andreosso. Bernadette is Director of the Euro-Asia Centre, Kemmy Business School, University of Limerick.

Full course details are available (on our beta site) here but the course topics include: the economic rise of Asia; the EU Global Strategy and Asia; EU-Asia Trade, investment and financial relations; the EU-South Korea FTA and the EU-India FTA (a comparative perspective); the interface between the EU and the Chinese economies; EU-Japan and EU-ASEAN relations; integration in Asia (monetary integration and trade patterns); the role of Asia in the current economic crisis.

Any business which is or which is contemplating doing business in Asia, or which finds itself under competitive pressure from this region, as well as policy makers and policy formers should consider attending. It should be appealing to all those confronted with decision making in a multi-polar world which is increasingly shaped by a number of emerging economies in Asia.

These topics will be covered by means of lectures as well as small workshops so as to maximise the level of interaction between the various participants.

 

QFA participants should note that CPD Hours are awarded: 4 QFAs CUAs LCOIs, 12 Chartered Bankers – CeBs.

What are the future business prospects for the Irish Economy?

The first course to be run by my Campus Company, Ussher Executive Education, takes place on 5 March 2012.  It’s a course on the future  business prospects for the Irish economy, looking back at what happened during the Celtic Tiger era (which properly speaking is the period from about 1997 to 2001/2002), the lasting influence of the bubble, and where business might be going.

The following is indicative of the kind of material that will be covered

  • Ireland’s potential for growth: Which elements of the Celtic Tiger will return, which will not?
  • what is the outlook for banking, for credit growth and creation, and for the housing  market.
  •  what’s going to happen with regard to Ireland’s national debt, and how will this impact on business.
  • can the Euro breakup, and if so what are the implications, good and bad, for Irish Business.
  • Where will jobs be created and where will they be lost in the next decade
The course will be delivered by Professor Karl Whelan. Full details are available here 
The course should be of great benefit to anyone who wishes to gain a comprehensive overview of the present state of the irish economy from a business perspective.

Thoughts on the future of banking in Ireland…

This is an extended version of a column published in the Irish Examiner, 21/1/12,
http://www.examiner.ie/business/co-operative-banks-may-be-the-way-forward-180948.html .

The news that the Newbridge Credit Union has been taken under care by the Central Bank is of course a source of great concern to depositors. However, things are not all bleak

Credit unions play a vital role in the Irish financial system. Total assets (loans outstanding in the main) as of the latest figures (2010) were. €21b, which amounts to c 5% of the total amount of loans outstanding to Irish residents as of that date.. If €1b is to be required to recapitalise losses that will, proportionally, be a good deal lower than for banks. Credit unions, despite the recent concerns, are as a body very different as compared to banks. The domestic banks as a whole, at end 2010, had a loan to deposit ratio for Irish residents of approx. 135%, while for credit unions this was only 45%. there would on the face of it appear to be room for Credit unions to engage in cautious increases in lending, if we wished to allow credit to grow (a whole other debate) but this is stymied by lending restrictions imposed last year. There is a good overview of the CU situation available in the report of the interm commission, available here.

There is long history of cooperative and alternative form banking, beyond shareholder owned models. Within Europe, cooperative banks have approx. 20% of the deposit and loan market, and account for in some cases up to 40% of all SME lending. The best known of the large cooperative banks include Rabo, CoOp (UK) and Credit Agricole. The academic evidence is that cooperative banks are similar or even slightly better when to other banks in terms of organizational efficiency, but provide lower returns on assets than shareholder owned banks. They typically are smaller than shareholder banks but the largest Cooperative banks are amongst the largest in the world, and have retained strong credit ratings, to date.

we also have evidence from world bank and other researchers on competition in banking. Recall that all financial services industry participants’ work within the same broad environment. in principle a cooperative bank can compete on the same range of products as one with any other ownership structure. If we now introduce a distortion, call it a blanket guarantee, for some but not all of the participants in the market, there will be consequences. We know the calamitous macroeconomic consequences. But at the level of the industry the non-guaranteed banks now face a perverse incentive. The subsidy that has been given to the guaranteed banks is not available to them. The unguaranteed banks have an incentive to increase risk in order to chase profitability, if they wish to remain in the market. Not only is the blanket guarantee an effective subsidy to the financing of the banks – however high the financing costs are to the covered banks they are much less than would be absent the guarantee – there is also a further subsidy from NAMA. Non-covered banks faced with poor loans are not in NAMA, therefore they have to either work them out themselves , costly in terms of time and effort and a continual ongoing drain on the operation, or they sell them which comes at the cost of an immediate bottom line hit. Given the date that was set for loan valuation in NAMA was November 2009, and that the commercial and residential values in Ireland are down 20-25% since then, were the non NAMA loans to be now sold off its reasonable to assume that this would be the additional hit to them. Finally bailed out banks have the ability to attract greater deposits or to pay more (perhaps even pay at a loss) for these deposits. Thus, the effect of the solutions has been to force the non-NAMA/Covered banks to either exit, to accept that they will be acting at a disadvantage, or to engage in more risky activities. Finally of course the bailed out banks themselves, having had a bailout once will expect another, have every incentive to increase their risk taking, which increases as public ownership increases. None of these findings are exactly conducive to good healthy banking.

The evidence is that more competitive banking systems, may in fact be less systemically risky, and show less signs of financial fragility. There is a meme in the Irish banking discourse that the crisis was caused by competitive pressures forcing what would otherwise have been good banks to loosen their credit standards. There is in fact little evidence of this. The share of the largest credit institutions in the bubble increased, not decreased; competition in the Irish market, as measured by the standard H index, decreased significantly; based on the quarterly survey of banks lending the competitive pressures, especially for home loans, were almost the same in terms of their effect on loosening or tightening credit standards as were perceptions of risk or ability of banks to access funds.


This gives us a possible route for Irish banking. When the dust settles it might be worth considering boosting the capacity of the credit union system as a whole, enabling one or two competitive but cooperative owned banks to emerge. Some encouragement of the formation of new cooperative banks would be useful as would be a consideration of whether or not we should cap the size (in order to foster competition) of domestic banks, to consider the winding down all majority state owned banks which have had moral hazard injected into them through bailing out and to encourage the transference of activities to new, clean, cooperative by preference banks which can compete on a new level playing field.

“Articles of the Future” – moving things along in a small way

As people may know I am among my other tasks a journal editor, editor of Research In International Business and Finance, published by Elsevier. And a fine journal it is…Elsevier have introduced the ‘Article of the Future’ concept recently, which aims to expand scholarly articles from simple static print to be a richer and hopefully more meaningful multimedia enabled communication. See here for more information.

As part of this development, RIBAF will now require any paper accepted for publication to be accompanied by either a short video presentation (such as the author(s)s explaining the motivation or importance or interesting aspects of the paper, a video presentation of any theoretical or econometric findings (such as a visualisation of how a volatility surface changes or simulation of a model as parameters and assumptions change) or a presentation of the paper (such as  a keynote or powerpoint slideset).  Humans are visual creatures if a picture is worth a thousand words, then how much is a video worth? More seriously, academic publications are in all essentials unchanged since the early 19th century – there are ongoing massive debates on peer review, charging, access and so forth, but we have as an academy given little thought to how the base element of how we present the work may take full advantage of modern  ICT.

Thoughts welcome!

Dear LaTeX…its not me, its you

So, I have tried, again, today, for the n-th time, to get to grips with LaTeX, via Lyx.  no go.

I have, as can be seen, written loads of papers, and made buckets of presentations, most all of which were via some version of MSOffice. But, I admit it, I have presentation envy – the LaTeX stuff looks much …cooler.

I today wanted to do what I would have thought was simple : use Lyx to create a simple presentation, in Beamer  (hell, id use powerdot or anything else) that had citations in it.

No joy. I get ? instead of citations, or author, ? instead of citations. I get lovely bibliographies, but not a citation in site or in sight . Why cannot this be? Can I not get Smith (2001) instead of ?, or maybe (author, ?) .

I have BibDesk, I have the Lyx, the latest installations of each. I have experimented with Latexian, and TexMaker, and TexShop. And yet a simple thing, a presentation, is a task akin to deciphering the rosetta stone while smacked out on ketamine blind drunk at midnight in a coal hole. I dont want to faff about with hashtags, brackets, parentheses, and forward and backward slashes. I had that in the early 1980s with some hideous early wordprocessor on a C64. no thanks. I just want it to work.

Going on the net is useless – jabberings about defined userblocks, or undefined or something, talk about installing and editing document preambles, loops that require you to install packages before styles before something else, people asserting that this error is nonexistent, is my fault for not doing something, is resolved, is unresolvable…. A whole subculture of people talking at each other with scare a care that nobody knows wtf they are on about…. Much like economists.

I give up. Back to Powerpoint or Keynote….. There has to be a market for a simple, user friendly, GUI based, quasi-wysiwg USABLE LaTeX front end, like a simpler  SciWord, that works, and can do things that people want, like insert citations without requiring that one spend hours wandering in nerdland…. GRRRR