Matthias Thiemann

'Out of the Shadows?' Accounting for Special Purpose Entities in European Banking Systems

This article focuses on national variations in the engagement of banks in off-balance sheet securitization in three case study countries: Spain, France and Germany. It is argued that the failures in prudential regulation that underpinned the recent financial crisis are not predominantly situated at the international level. This article focuses on the way that national accounting rules determine whether the Special Purpose Entities of banks are off- or on-balance sheet. The analysis shows that national accounting norms are an important building block for prudential regulation, and these are prone to wider political influences.

Taming Finance by Empowering Regulators: A Survey of Policies, Politics and Possibilities

This paper examines important and desirable reforms of the international financial regulatory and taxation architecture, both from the perspective of their technical desirability and their political feasibility. The paper provides insights into how to increase the chances that desirable changes in the financial and taxation architecture will actually happen. In providing a map on the prospects of financial reform, the paper identifies the main political and technical hazards to be navigated. To do so, and pinpoint the key dangers, the paper employs Albert Hirschmann‘s framework for understanding negative reactions to reform agendas. We conclude by stressing that the need for reform is vital given the threat financial crises pose to development and poverty reduction. Acknowlegements We thank Joseph Stiglitz, Jane d‘Arista, Damon Silvers, Eric Helleiner, Stephen Spratt and David Hillman for very insightful suggestions. Responsibility for any mistakes is our own. We are very grateful to Diana Alarcón from UNDP, for commissioning this study and for her valuable encouragement of our work. We are also very grateful to Jane d‘Arista and two unknown referees for excellent comments on an earlier draft. Contact Information Stephany Griffith-Jones (sgj2108@columbia.edu), Matthias Thiemann (mt2430@columbia.edu) and Leonard Seabrooke (L.Seabrooke@warwick.ac.uk)

Building a hidden investment state? The European Investment Bank, national development banks and European economic governance

ABSTRACT The European Commission’s Investment Plan for Europe and the enduring economic crisis has brought state-owned development banks again to the fore of public and scholarly debate in Europe. This article proposes to place these banks’ activities and recent institutional co-operation in the context of European integration and assumes a historical perspective on European economic governance and development banking. Most importantly, it argues that the European Investment Bank has become a centre of gravity in long-standing political attempts to increase the investment firepower of the European Union. Based on detailed process-tracing analysis through publicly available data and interview material, the article delineates a gradual process of institutional innovation and network formation that advanced since the late 1980s and culminated in recent post-crisis policy processes. The contemporary visibility of development banking in Europe, we conclude, follows from these and is representative of a nucleus for a – somewhat hidden – European investment state, whose reach and stability, however, is yet to be determined.

Market-based but state-led: The role of public development banks in shaping market-based finance in the European Union:

This paper examines the European Union’s strategy of governing the economy through financial markets by focusing on the largely unacknowledged role of public development banks, including the multilateral European Investment Bank. It argues that these state-owned financial institutions have moved into a key position in the recent evolution of the European financial system and economic governance. Since the crisis, policy makers have used them to address the intrinsic volatility and excess liquidity of contemporary financial markets, as well as offset the constraints on public investment imposed by institutionalized fiscal austerity. The paper provides evidence for this claim through an analysis of the emergent policy nexus between the Investment Plan for Europe and the Action Plan on Building a Capital Markets Union. Based on official documents and interview data, it specifically traces the risk-sharing devices for small- and medium-sized enterprise and infrastructure finance set up by development banks within these initiatives. Equipped with public guarantees, they have been instrumental for the promotion of securitization markets and public–private partnerships through increased multilevel collaborations among development banks. The anchor role of such quasi-fiscal state actors in shaping capital markets, the paper concludes, has profound political implications, and therefore warrants further scholarly attention.

Recent Developments in Regulation in the Light of the Global Financial Crisis: Implications for Developing Countries

Prior to the financial crisis, the global financial system failed to fulfill its two main purposes: managing risk and efficiently allocating capital. Many emerging market banks did not have significant exposure to “toxic assets”, and were better able to withstand the financial market crisis than banks in industrialized countries. Some countries, such as Brazil, imposed restrictions on derivatives and naked short selling prior to the crisis, and instituted reserve requirements well in excess of Basel 2 minimums. (See UN, 2010.) Nonetheless, as markets continue to develop, financial institutions in middle income countries are becoming more exposed to the types of risks that hobbled the global financial system. Furthermore, in many middle income countries much of the assets of the financial system have traditionally gone into government paper rather than lending to the real economy, whereas access to credit to small and medium sized enterprises (SMEs) is necessary for sustained economic growth and development. The challenge for emerging market and middle income policymakers is to