The impact of liquidity on senior credit index spreads during the subprime crisis

This paper examines the effects of liquidity during the 2007–09 crisis, focussing on the Senior Tranche of the CDX.NA.IG Index and on Moody's AAA Corporate Bond Index. It aims to understand whether the sharp increase in the credit spreads of these AAA-rated credit indices can be explained by worse credit fundamentals alone or whether it also reflects a lack of depth in the relevant markets, the scarcity of risk-capital, and the liquidity preference exhibited by investors. Using cointegration analysis and error correction models, the paper shows that during the crisis lower market and funding liquidity are important drivers of the increase in the credit spread of the AAA-rated structured product, whilst they are less significant in explaining credit spread changes for a portfolio of unstructured credit instruments. Looking at the experience of the subprime crisis, the study shows that when the conditions under which securitisation can work properly (liquidity, transparency and tradability) suddenly disappear, investors are left highly exposed to systemic risk.

Some reports of snowfall from fog during the UK winter of 2008/09

Snowfall during anticyclonic, non-frontal, and foggy conditions is surprising. Because it is often not forecast, it can present a hazard to transport and modify the surface albedo. In this report, we present some observations of snowfall during conditions of freezing fog in the UK during the winter of 2008/09.

Institutional pressures on financial services firms: the role of information systems in regulatory compliance

The financial crisis of 2008 led to new international regulatory controls for the governance, risk and compliance of financial services firms. Information systems play a critical role here as political, functional and social pressures may lead to the deinstitutionalization of existing structures, processes and practices. This research examines how an investment management system is introduced by a leading IT vendor across eight client sites in the post-crisis era. Using institutional theory, it examines changes in working practices occurring at the environmental and organizational levels and the ways in which technological interventions are used to apply disciplinary effects in order to prevent inappropriate behaviors. The results extend the constructs of deinstitutionalization and identify empirical predictors for the deinstitutionalization of compliance and trading practices within financial organizations.

Greek politics: economic crisis or crisis of democracy?

Greece’s economic instability has become the Western world’s longest-running monetary crisis. Will Germany allow the EU to keep propping up Greece’s unstable financial system? Will the country leave the eurozone? Will such a departure, if it occurs, unravel the idea of “Europe”? All valid questions. But behind them stands another equally profound social and political crisis that has made Greece the weak man of Europe.

Foreign direct investment in high-risk environments: an historical perspective

Since the banking crisis of 2008 the global economy is perceived as riskier than before. Firms that cannot manage risks have withdrawn from countries in which they previously invested. These problems are not new. For centuries firms have invested in risky foreign environments, and many of them have succeeded. This paper reviews the risk management strategies of foreign investors. Using archival evidence and secondary sources it distinguishes the different types of risks that investors face and the different strategies by which risks can be managed. It investigates which strategies are used to manage which types of risk.

Resilience planning, economic change and the politics of post-recession development in London and Hong Kong

For much of the 1990s and 2000s, the emphasis of urban policy in many global cities was on managing and mitigating the social and environmental effects of rapid economic growth. The credit crunch of 2008 and the subsequent recession have undermined some of the core assumptions on which such policies were based. It is in this context that the concept of resilience planning has taken on a new significance. Drawing on contemporary research in London and Hong Kong, the paper shows how resilience and recovery planning has become a key area of political debate. It examines what is meant by conservative and radical interpretations of resilience and how conservative views have come to dominate ‘recovery’ thinking, with élite groups unwilling to accept the limits to the neo-liberal orthodoxies that helped to precipitate the economic crisis. The paper explores the implications of such thinking for the politics of urban development.

The role of Investment Management Systems in regulatory compliance: a Post-Financial Crisis study of displacement mechanisms

The financial crisis of 2007–2009 and the resultant pressures exerted on policymakers to prevent future crises have precipitated coordinated regulatory responses globally. A key focus of the new wave of regulation is to ensure the removal of practices now deemed problematic with new controls for conducting transactions and maintaining holdings. There is increasing pressure on organizations to retire manual processes and adopt core systems, such as Investment Management Systems (IMS). These systems facilitate trading and ensure transactions are compliant by transcribing regulatory requirements into automated rules and applying them to trades. The motivation of this study is to explore the extent to which such systems may enable the alteration of previously embedded practices. We researched implementations of an IMS at eight global financial organizations and found that overall the IMS encourages responsible trading through surveillance, monitoring and the automation of regulatory rules and that such systems are likely to become further embedded within financial organizations. We found evidence that some older practices persisted. Our study suggests that the institutionalization of technology-induced compliant behaviour is still uncertain.

[Global climate] global aerosols [in state of the climate in 2008]

The global mean temperature in 2008 was slightly cooler than that in 2007; however, it still ranks within the 10 warmest years on record. Annual mean temperatures were generally well above average in South America, northern and southern Africa, Iceland, Europe, Russia, South Asia, and Australia. In contrast, an exceptional cold outbreak occurred during January across Eurasia and over southern European Russia and southern western Siberia. There has been a general increase in land-surface temperatures and in permafrost temperatures during the last several decades throughout the Arctic region, including increases of 1° to 2°C in the last 30 to 35 years in Russia. Record setting warm summer (JJA) air temperatures were observed throughout Greenland. The year 2008 was also characterized by heavy precipitation in a number of regions of northern South America, Africa, and South Asia. In contrast, a prolonged and intense drought occurred during most of 2008 in northern Argentina, Paraguay, Uruguay, and southern Brazil, causing severe impacts to agriculture and affecting many communities. The year began with a strong La Niña episode that ended in June. Eastward surface current anomalies in the tropical Pacific Ocean in early 2008 played a major role in adjusting the basin from strong La Niña conditions to ENSO-neutral conditions by July–August, followed by a return to La Niña conditions late in December. The La Niña conditions resulted in far-reaching anomalies such as a cooling in the central tropical Pacific, Arctic Ocean, and the regions extending from the Gulf of Alaska to the west coast of North America; changes in the sea surface salinity and heat content anomalies in the tropics; and total column water vapor, cloud cover, tropospheric temperature, and precipitation patterns typical of a La Niña. Anomalously salty ocean surface salinity values in climatologically drier locations and anomalously fresh values in rainier locations observed in recent years generally persisted in 2008, suggesting an increase in the hydrological cycle. The 2008 Atlantic hurricane season was the 14th busiest on record and the only season ever recorded with major hurricanes each month from July through November. Conversely, activity in the northwest Pacific was considerably below normal during 2008. While activity in the north Indian Ocean was only slightly above average, the season was punctuated by Cyclone Nargis, which killed over 145,000 people; in addition, it was the seventh-strongest cyclone ever in the basin and the most devastating to hit Asia since 1991. Greenhouse gas concentrations continued to rise, increasing by more than expected based on with CO2 the 1979 to 2007 trend. In the oceans, the global mean uptake for 2007 is estimated to be 1.67 Pg-C, about CO2 0.07 Pg-C lower than the long-term average, making it the third-largest anomaly determined with this method since 1983, with the largest uptake of carbon over the past decade coming from the eastern Indian Ocean. Global phytoplankton chlorophyll concentrations were slightly elevated in 2008 relative to 2007, but regional changes were substantial (ranging to about 50%) and followed long-term patterns of net decreases in chlorophyll with increasing sea surface temperature. Ozone-depleting gas concentrations continued to fall globally to about 4% below the peak levels of the 2000–02 period. Total column ozone concentrations remain well below pre-1980, levels and the 2008 ozone hole was unusually large (sixth worst on record) and persistent, with low ozone values extending into the late December period. In fact the polar vortex in 2008 persisted longer than for any previous year since 1979. Northern Hemisphere snow cover extent for the year was well below average due in large part to the record-low ice extent in March and despite the record-maximum coverage in January and the shortest snow cover duration on record (which started in 1966) in the North American Arctic. Limited preliminary data imply that in 2008 glaciers continued to lose mass, and full data for 2007 show it was the 17th consecutive year of loss. The northern region of Greenland and adjacent areas of Arctic Canada experienced a particularly intense melt season, even though there was an abnormally cold winter across Greenland's southern half. One of the most dramatic signals of the general warming trend was the continued significant reduction in the extent of the summer sea-ice cover and, importantly, the decrease in the amount of relatively older, thicker ice. The extent of the 2008 summer sea-ice cover was the second-lowest value of the satellite record (which started in 1979) and 36% below the 1979–2000 average. Significant losses in the mass of ice sheets and the area of ice shelves continued, with several fjords on the northern coast of Ellesmere Island being ice free for the first time in 3,000–5,500 years. In Antarctica, the positive phase of the SAM led to record-high total sea ice extent for much of early 2008 through enhanced equatorward Ekman transport. With colder continental temperatures at this time, the 2007–08 austral summer snowmelt season was dramatically weakened, making it the second shortest melt season since 1978 (when the record began). There was strong warming and increased precipitation along the Antarctic Peninsula and west Antarctica in 2008, and also pockets of warming along coastal east Antarctica, in concert with continued declines in sea-ice concentration in the Amundsen/Bellingshausen Seas. One significant event indicative of this warming was the disintegration and retreat of the Wilkins Ice Shelf in the southwest peninsula area of Antarctica.

State capitalism and social responsibility in China's banking industry

China’s financial system has experienced a series of major reforms in recent years. Efforts have been made towards introducing the shareholding system in state-owned commercial banks, restructuring of securities firms, re-organising equity of joint venture insurance companies, further improving the corporate governance structure, managing financial risks and ultimately establishing a system to protect investors (Xinhua, 2010). Financial product innovation, with the further opening up of financial markets and the development of the insurance and bond market, has increased liquidity as well as reduced financial risks. The U.S. subprime crisis indicated the benefit of financial innovations for the economy, but without proper control, they may lead to unexpected consequences. Kirkpatrick (2009) argues that failures and weaknesses in corporate governance arrangements and insufficient accounting standards and regulatory requirements attributed to the financial crisis. Similar to the financial crises of the last decade, the global financial crisis which sparked in 2008, surfaced a variety of significant corporate governance failures: the dysfunction of market mechanisms, the lack of transparency and accountability, misaligned compensation arrangements and the late response of government, all which encouraged management short-termism, poor risk management, as well as some fraudulent schemes. The unique characteristics of the Chinese banking system are an interesting point for studying post-crisis corporate governance reform. Considering that China modelled its governance system on the Anglo-American system, this paper examines the impact of the financial crisis on corporate governance reform in developed economies, and particularly, China’s reform of its financial sector. The paper further analyses the Chinese government’s role in bank supervision and risk management. In this regard, the paper contributes to the corporate governance literature within the Chinese context by providing insights into the contributing factors to the corporate governance failure that led to the global financial crisis. It also provides policy recommendations for China’s policy makers to seriously consider. The results suggest a need for the re-examination of corporate governance adequacy and the institutionalisation of business ethics. The paper’s next section provides a review of China’s financial system with reference to the financial crisis, followed by a critical evaluation of a capitalistic system and a review of Anglo-American and Continental European models. It then analyses the need for a new corporate governance model in China by considering the bank failures in developed economies and the potential risks and inefficiencies in a current State controlled system. The paper closes by reflecting the need for Chinese policy makers to continually develop, adapt and rewrite corporate governance practices capable of meeting the new challenge, and to pay attention to business ethics, an issue which goes beyond regulation.

Flight to quality? An investigation of the attributes of sold properties in hot and cold markets

This paper uses sales transaction data in order to examine whether flight from risk phenomena took place in the US office property investment market during the financial crisis of 2007-2009. The effect of the crisis on the pricing of property quality attributes, mainly summarized by the class category of each building, is investigated. In addition, the paper examines how turnover levels were affected by the market downturn and whether there were significant variations between different real estate quality types. The results of the hedonic regression models suggest that the price spread between Class, A, B and C grew significantly during the downturn. We also find that property attributes such as size, height and age are priced significantly different in ‘hot’ and ‘cold’ markets.