Finance

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    Large economic benefits justify small-firm loan guarantees in the Covid-19 crisis

Large economic benefits justify small-firm loan guarantees in the Covid-19 crisis

Loan guarantees are a main policy response during the Covid-19 crisis. These guarantees were also popular during the Great Recession, but their demand from businesses in this crisis is unprecedented. The relatively worse economic conditions undoubtedly explain much of current demand, but also possibly highlight the differences in the guarantees’ design for each crisis. Will the new guarantees be […]

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    Coronavirus and the stock market: science cannot predict the outcome, but does it matter?

Coronavirus and the stock market: science cannot predict the outcome, but does it matter?

As always in times of market turmoil, investors turn to financial experts to understand what is going on with their savings. More specifically, they want to figure out what to do with their financial investments: Is it the right time to sell or is it better to purchase what seems like cheaper stocks?

It results in a steep increase in […]

April 23rd, 2020|COVID-19, Finance|0 Comments|
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    Eurobonds (or coronabonds) would not be costly for Northern euro area countries

Eurobonds (or coronabonds) would not be costly for Northern euro area countries

There are currently heated debates on eurobonds, partly with the name coronabonds. This topic is also on the agenda again for the next EU and euro area meetings. Some countries, which have to pay relatively high interest rates on their government debt, demand the issuance of such bonds, most notably Italy, understandably assuming that such bonds would reduce their […]

April 16th, 2020|COVID-19, Finance|3 Comments|

How investor pressure leads to higher dividend payouts

UK dividends paid out in 2019 reached nearly £100bn, an all-time high, with nine out of ten sectors raising dividend payouts (Darbyshire, 2020). At the same time, there have been numerous reports of companies such as Carillion, Thomas Cook, Woodford Investment Management, and BHS paying dividends that were unwarranted by underlying financial health.

Following the unprecedented effects of the Covid-19 […]

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    The Covid-19 impact on fintech: now is the time to boost investment

The Covid-19 impact on fintech: now is the time to boost investment

While the coronavirus pandemic sweeps the entire world, governments’ response to the international health crisis has led the global economy to a standstill. Extensive lockdowns and social distancing measures are leading to massive unemployment spikes and numerous businesses are already seeing dramatic loss of revenue and struggling to maintain their operations.

In the US, unemployment rates rose to 4.4% in […]

April 13th, 2020|COVID-19, Finance|1 Comment|

How to restart the economy after Covid-19

The Covid-19 crisis has brought many sectors of the global economy to a halt. Firms in these sectors have no revenues while the lockdown is in place, yet they still pay salaries, rents, and debt interest. These expenditures are often deferred – including through government-sponsored programs – but rarely waived. The hiatus increases financial pressure on the firms, as […]

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    Comparing the coronavirus crisis to 2008 is inevitable, but they’re quite different

Comparing the coronavirus crisis to 2008 is inevitable, but they’re quite different

Coronavirus is having a strong impact on the world economy. What about the financial system? Is a systemic financial crisis likely, perhaps along the lines of the crisis 12 years ago in 2008, or even the Great Depression of the 1930s?

There are certainly similarities: widespread bankruptcies, liquidity shortages, large losses and some financial institutions may fail. Still, that in itself does […]

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    Popular governments may be a sign of future financial crises

Popular governments may be a sign of future financial crises

One well-documented predictor of financial crises are credit booms and capital flow bonanzas. Indeed, many banking and current account crises (sudden stops) have been preceded by unusual expansion of domestic and/or external credit (see for example Reinhart and Reinhart 2008, Forbes and Warncock 2012, Schularick and Taylor 2012, Mendoza and Terrones 2012). To the best of our knowledge, however, […]

Predicting bank distress with machine learning

The great American baseball sage, Yogi Berra, is thought to have once remarked: ‘It’s tough to make predictions, especially about the future’. That is certainly true, but thankfully the accelerating development and deployment of machine learning methodologies in recent years is making prediction easier and easier. That is good news for many sectors and activities, including microprudential regulation. In […]

March 12th, 2020|Finance, LSE alumni|0 Comments|

The effect of structural reforms on public debt  

There is broad consensus on the desirability of making markets more efficient, across several economies to increase competitiveness and improve future growth prospects (OECD, 2012; European Commission, 2013; IMF, 2016; OECD, 2012).  In the current policy context, advancing structural reforms is of paramount importance to address the decline in productivity growth — the key long-term driver of living standards — […]

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    The growth of environmental, social and corporate governance in investing

The growth of environmental, social and corporate governance in investing

The wealth management industry is continuously changing. As we have seen over the last few years, active management is falling out of fashion and has become less ‘fashionable’ with asset allocators every year this millennium. In the last decade since the global financial crisis, we have seen the relentless expansion of the passive management industry and a consumer base […]

February 26th, 2020|Environment, Finance|0 Comments|

Putting sustainable finance into practice

Ensuring that their investment portfolio contribute to the long-term sustainability of the planet is one of the key challenges organisations face today. That means adopting prudent financing and a thoughtful investment strategy. But how can financial sector players go about doing that? Sustainable finance raises a lot of practical questions. Many initiatives have been launched to provide businesses with […]

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    Retail banks are far from obsolete: they are needed more than ever in the age of data

Retail banks are far from obsolete: they are needed more than ever in the age of data

The internet has fundamentally reformed a number of industries. Newspaper publishing lost the deep moat that investment in printing presses and distribution once represented. Music publishing went the same way. Now the quantity of data that online devices can gather makes it possible to start programming useful machine learning and artificial intelligence applications. Alexa can parse your mood.

What will […]

February 4th, 2020|Finance|0 Comments|

Fuelling procompetitive growth with foreign credit

The debate about the desirability of international financial flows is at the centre of the discussion of researchers and policy makers. This article focuses on one key aspect of capital controls: their impact on firms’ access to capital markets and their consequences for competition and aggregate productivity growth. Indeed, cross-country studies report that the deregulation of international capital flows […]

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    There is a ‘good’ reason for EU banks to hold their own country’s sovereign debt

There is a ‘good’ reason for EU banks to hold their own country’s sovereign debt

Is it possible to attribute the banks’ home bias in sovereign exposure to something beyond their externally-imposed (such as moral suasion) or internally-distorted (such as risk-shifting) incentives? Despite the so-called doom loop between the two, could the relationship of banks with their domestic governments have an underexplored silver lining?

These are the questions I pursue in a recent paper. By […]

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    Cyber risk governance should take centre stage in financial services

Cyber risk governance should take centre stage in financial services

It feels as though cyber risk has crept up on us without warning and with great intensity.

We have come a long way from the days when our palm pilots had to be hot-sync’d through a docking station and the occasional hazard was from viruses transmitted as email attachments. Over the years, we have embraced extreme connectivity combined with extreme […]

December 4th, 2019|Finance, IDEAS, LSE Authors|0 Comments|
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    How to change the paradigm in finance to incorporate a changing environment

How to change the paradigm in finance to incorporate a changing environment

Climate change poses existential threats to global prosperity, but political and economic systems are unprepared for responding to that risk. Governance, incentives and thinking are still misaligned. The financial and corporate sectors could play an important role in turning the tide by truly managing for long-term value creation, i.e. by managing for positive financial, social and environmental returns in […]

December 2nd, 2019|Environment, Finance|0 Comments|

Do tweets from CEOs matter to investors?

Social media provides today’s CEOs a quicker and more direct way to communicate with investors. The Securities and Exchange Commission cleared public companies to use social media to disclose information as long as investors know which social media sites will be used.

Despite the growth in CEOs’ social media use, we know little about how such use affects investors, and […]

November 29th, 2019|Finance|0 Comments|
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    Do six per cent of financial transactions sent via the Swift system really fail?

Do six per cent of financial transactions sent via the Swift system really fail?

In May 2019, Brad Garlinghouse, CEO of a San Francisco based (but Delaware registered) fintech firm called Ripple Labs gave a presentation to the 9th High-Level Conference on the International Monetary System. The small audience included Christine Lagarde (then chairman of the IMF) and the heads of several central banks. He described a problem in the world financial system […]

What’s wrong with bank culture?

Each year I give an undergraduate lecture on student loans. It is a thoroughly depressing two-hour slot. But each year it also reminds me how the student experience has changed since I began my undergraduate degree in 1997. One memory stands out in particular. It is the memory of visiting four large UK retail banks in my local village […]

October 9th, 2019|Finance|1 Comment|