Eco ideas: Anat Admati – “Five Years of Financial Non-Reform”

Today reading is Anat Admati – “Five Years of Financial Non-Reform”

Anat Admati, Professor of Finance and Economics at the Stanford Graduate School of Business

Five years after the collapse of Lehman Brothers triggered the largest global financial crisis since the Great Depression, outsize banking sectors have left economies shattered in Ireland, Iceland, and Cyprus. Banks in Italy, Spain, and elsewhere are not lending enough. China’s credit binge is turning into a bust. In short, the world’s financial system remains dangerous and dysfunctional.

Worse, despite years of debate, no consensus about the nature of the financial system’s problems – much less how to fix them – has emerged. And that appears to reflect the banks’ political power.

Regulations everywhere appear to be based on the false notion that banks should have “just enough” equity. Equity is not scarce for viable banks, and the “science” of complex risk weights and stress tests is a harmful illusion. Instead, regulation should seek to force banks’ investors to bear much more of their own risk, and thus to care much more about managing it, in order to limit the collateral damage of their excessive borrowing.

Some say that banks are inherently special, because they allocate society’s savings and create liquidity. In fact, banks have become special mainly in their ability to get away with so much gambling at others’ expense. Nothing about financial intermediation justifies allowing banks to distort the economy and endanger the public as much as they do.

Unfortunately, despite the enormous harm from the financial crisis, little has changed in the politics of banking. Too many politicians and regulators put their own interests and those of “their” banks ahead of their duty to protect taxpayers and citizens. We must demand better.

Moldova's financial information from IMF

Emerging Market External Financing: Total Bonds, Equities, and Loans
(In millions of U.S. dollars)


2004      2005   2006  2007    2008         Q1     Q2     Q3        Q4
7.0        13.1          —           —         171.3             —       —      63.0     108.3

Bank Regulatory Capital to Risk-Weighted Assets
(In percent)


2003    2004    2005    2006   2007   2008   Latest

31.6      31.4      27.0          27.9       29.1     32.2     December

Bank Capital to Assets
(In percent)


2003     2004     2005    2006    2007  2008     Latest


19.7 18.3 15.7 16.7 16.3 17.0 December

19.7        18.3       15.7      16.7        16.3        17.0    December

Bank Nonperforming Loans to Total Loans
(In percent)


2003   2004   2005   2006    2007   2008  Latest

6.4          6.9         5.3         4.4      3.7       5.2      December

Bank Provisions to Nonperforming Loans
(In percent)


2003     2004      2005     2006     2007       2008   Latest

87.6        85.5      98.9         117.3       113.8       94.2       December

Bank Return on Assets
(In percent)


2003  2004   2005    2006    2007    2008     Latest
4.4       3.7         2.8         3.4            3.9       3.5            December

Bank Return on Equity
(In percent)


2003          2004      2005      2006       2007       2008      Latest

19.7           17.8          15.4        20.5           24.0            19.9            December

Source : Global Financial Stability Report, April 2009

Investprivatbank in faliment / Банкротство "Инвестприватбанка" / Bankruptcy of InvestprivateBank


Banca Naţională a Moldovei a retras, la 19 iunie, „licenţa de desfăşurare a activităţilor financiare a Băncii Comerciale „Investprivatbank” S.A, numindu-l lichidator, conform Legii instituţiilor financiare, pe expertul de la  Banca Naţională a Moldovei Ion Ropot”, anunţă BNM printr-un comunicat de presă.

Emma Tăbârţă a menţionat că în cadrul controlului efectuat de BNM a fost depistat că banca nu menţine mărimea capitalului de gradul I şi a coeficientului suficienţei capitalului ponderat la risc în conformitate cu cerinţele stabilie de BMN, încălcând astfel articolele 5 şi 14 din Legea instituţiilor financiare şi ale Regulamentului BNM cu privire la suficienţa capitalului ponderat la risc. De asemenea, a fost depistat că banca nu menţinea lichiditatea curentă în termenele şi mărimea în conformitate cu exigenţele prevăzute de BNM cu privire la lichiditatea băncii. Nerespectarea acestor prevederi a condus la dependenţa băncii de resurse lichide atrase pe piaţa interbancară.

Totodată, «din cauza managementului neadecvat», banca a ajuns în incapacitate de plată. În afară de asceasta potrivit ei, începând cu 31 martie, banca a prezentat date eronate privind mărimea capitalului de gradul I, coeficientul suficienţei capitalului ponderat la risc şi datele cu privire la lichiditatea băncii. Astfel, coeficientul real de lichiditate al băncii constituia 8,84%, iar capitalul de gradul I al băncii constituia minus 117 mil. lei, pe când banca a indicat capitalul de gradul I în valoare de 176 mil. lei.


Нацбанк Молдовы отозвал лицензию у “Инвестприватбанка”. Десятки вкладчиков штурмуют офис банка.
Банкротство произошло из-за того, что банк предоставлял ложные отчеты по ликвидности, отметила Тэбырцэ.