In a conversation with Yale SOM’s Andrew Metrick, Paul Tucker, chair of the Systemic Risk Council and former deputy governor for financial stability at the Bank of England, says that financial markets are still facing serious stability risks.
Once you start pulling at the strands, the intertwined political and financial systems can prove very difficult to separate. A panel of financial veterans at Yale SOM’s Future of Finance conference considered recent government interventions in markets across a number of countries, and what they mean for investors.
Large, investment-grade companies such as Walmart and Home Depot that can easily borrow money in the capital markets often receive financing from their much smaller, credit-constrained suppliers. A new study examines the effects of this pattern of financing and finds that it squeezes small suppliers, creating a cash shortfall and causing them to cut back on capital investments.
Europe is still struggling to emerge from the financial crisis. Though recent stress tests by the European Central Bank gave passing grades to 90% of the region’s banks, critics question the transparency and rigor of the tests. Professor Sascha Steffen of ESMT European School of Management and Technology, a member of the Global Network for Advanced Management, talked with Yale Insights about the state of the banking system and the challenges of designing and implementing a single system to oversee banks across the Eurozone.
Lei Zhang ’02 has been one of the most successful investors in China during a time of unprecedented change. In a conversation with Yale’s Stephen Roach, he talked about rapid shifts in China’s business and culture, the birth of a consumer class, the Chinese innovation model, and the outmoded views of the country that remain prevalent in the West.
In a New York Times op-ed, Professor Robert J. Shiller explains that stock market movements are driven by popular narratives that spread like “thought viruses.” Secular stagnation—the idea that the global economy may languish for years to come—is the current story driving down the stock market. Whether true or false, the idea alone has the potential to erase five years of gains and create a bear market.
Paul Tucker was one of the key players at the Bank of England during the financial crisis of 2008-09. He says that the actions of policymakers and regulators since that time have built a more resilient financial system. But he also sees big challenges ahead that will require regulators to be more nimble and flexible than they’ve ever been before.