OECD Journal: Financial Market Trends

Frequency :
Semiannual
ISSN :
1995-2872 (online)
ISSN :
1995-2864 (print)
DOI :
10.1787/19952872
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The twice-yearly journal from OECD providing timely analyses and statistics on financial matters of topical interest and longer-term developments in specific financial sectors. Each issue provides a brief update of trends and prospects in the international and major domestic financial markets along with articles covering such topics as structural and regulatory developments in OECD financial systems, trends in foreign direct investment, trends in privatization, and financial sector statistics covering areas such as bank profitability, insurance, and institutional investors.

Periodically, a small number of articles within one field of financial sector developments – constituting the so-called special focus for the particular issue – may be included.

Now published as part of the OECD Journal package.

 
 
 

Volume 2008, Issue 2 You do not have access to this content

Publication Date :
07 Jan 2009
DOI :
10.1787/fmt-v2008-2-en

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  07 Jan 2009 Click to Access:  The current financial crisis
Adrian Blundell-Wignall, Paul Atkinson, Se Hoon Lee
This article treats some ideas and issues that are part of ongoing reflection at the OECD. They were first raised in a major research article for the Reserve Bank of Australia conference in July 2008, and benefited from policy discussion in and around that conference. One fundamental cause of the crisis was a change in the business model of banking, mixing credit with equity culture. When this model was combined with complex interactions from incentives emanating from macro policies, changes in regulations, taxation, and corporate governance, the current crisis became the inevitable result. The paper points to the need for far-reaching reform for a more sustainable situation in the future.
  07 Jan 2009 Click to Access:  Lessons from the financial market turmoil
Gert Wehinger
This financial crisis, ending a period of search for yield and increased risktaking,
has triggered various policy responses, ranging from more ad-hoc measures initially to more structured and co-ordinated financial sector rescue actions as the crisis evolved.
Lessons drawn so far should help to devise longer-term, more encompassing and more consistent policies. Various reforms are being proposed by the financial industry as well as by official authorities and international standard-setting bodies, many of which arrive at similar conclusions regarding the causes of and remedies for the crisis.
Shortcomings in risk management, including compensation schemes, governance structures, liquidity and counterparty risk, need to be addressed.
  07 Jan 2009 Click to Access:  Financial crisis: Deposit insurance and related financial safety net aspects
Sebastian Schich
Government provision of a financial safety net for banks and other financial
institutions has been a key element of the policy response to the current financial
crisis. In the process, the design of many safety net elements, such as deposit
insurance, has been redrawn in many jurisdictions. In particular, governments
extended existing guarantees and introduced new ones. While these measures did
not address the root causes of the lack of confidence, they were nevertheless
helpful in avoiding a further accelerated loss of confidence, thus buying valuable
time.
  07 Jan 2009 Click to Access:  Resolutions of weak institutions
Stephen Lumpkin
The present financial crisis may be added to a growing list of episodes worldwide in which financial sector problems have become systemic in nature. Many OECD countries have been affected, either directly or through the transmission of problems cross-border. Most financial crises share a number of common elements.
For instance, financial innovation has often played a role in distress episodes, in many cases, having much to do with their idiosyncratic aspects. For example, structured credit products and the latest incarnation of the originate-and-distribute model of intermediation have been at the epicentre of the current crisis. It differs from other crisis episodes in having a sub-component of the residential mortgage sector as its trigger, while previous crises have more often been prompted by problems in the commercial mortgage market and with corporate clients.
  07 Jan 2009 Click to Access:  Ageing and the payout phase of pensions, annuities and financial markets
Pablo Antolin
This paper reviews the impact of ageing on private pensions, in particular on the payout phase, assesses the part that annuities can play in financing retirement, and examines the role of financial markets in facilitating the allocation of assets accumulated in defined contribution pension plans.
A comprehensive set of recommendations for consideration is provided at the end of the paper.
  07 Jan 2009 Click to Access:  Challenges for financial intermediaries offering asset decumulation products
Sebastian Schich
The present article focuses on issues related to asset decumulation. In discussing these issues, a key proposition is that financial institutions are most willing and able to offer decumulation products with fixed payment promises to the extent they are able to invest in financial assets that allow them to hedge a considerable part of the risks associated with the payment promises they extend.
Indeed, what is sometimes overlooked in discussions bout shifts from asset accumulation to decumulation is that the decumulation phase also involves investment challenges, especially if specific patterns of payouts such as regular payouts of fixed amounts are aimed at. Many writers have argued for some time now that pension fund managers will have difficulty implementing asset-liability matching because there are insufficient quantities of suitable assets. As it turns out, the shortfall in hedging instruments extends to more than just the "toxic" tail of longevity risk, as is commonly being argued. The analysis in this article shows that hedging interest rate risk is also not as straightforward as one may think.
  07 Jan 2009 Click to Access:  Revisiting the asset-meltdown hypothesis
Sebastian Schich
The present article focuses on the so-called "asset meltdown hypothesis", which postulates a direct link between demographic developments and the level of asset
prices. In particular, proponents of this hypothesis argue, when baby boomers start
entering retirement they will become net sellers of financial assets to finance retirement consumption. As subsequent generations are smaller in numbers, other things equal, this would put downward pressure on financial asset prices. Revisiting this hypothesis, there is some support for a link between demographics and financial asset prices, although the link may not be strong. A number of mitigating factors exist, so that "other things" will not be equal. A major question in this context is to what extent demographic developments and their implications for other variables affecting financial asset prices are already reflected in financial asset prices and how fast any additional pressures on financial asset prices will play themselves out.
  07 Jan 2009 Click to Access:  Pension fund governance
Fiona Stewart, Juan Yermo
Good governance is increasingly recognised as an important aspect of an efficient private pension system, enhancing investment performance and benefit security. Yet, despite regulatory and industry initiatives, governance weaknesses persist across OECD and non-OECD countries.
This paper highlights the main governance challenges faced by policymakers (particularly with trust-based pension systems), and draws on recent policy initiatives to propose possible solutions to strengthen governance arrangements.
  07 Jan 2009 Click to Access:  Secondary market liquidity in domestic debt markets
Hans J. Blommestein, Alison Harwood, Philipp Anderson, Ceyla Pazarbasioglu
The Tenth OECD/World Bank/IMF Annual Global Bond Market Forum highlighted that liquidity is a complex concept with different dimensions – micro liquidity vs. macro liquidity, market liquidity vs. funding liquidity, endogenous vs. exogenous liquidity, and so on. Relative liquidity (including ‘liquidity freezes or squeezes’) can best be explained by focusing on the market’s institutional structure, in particular the architecture of electronic trading platforms, the importance of OTC trading, the nature and width of the investor base, disclosure requirements, valuation methods, the role of primary dealers including market-making requirements or conventions, tax factors, and the role of issuers of government bonds and other fixed-income instruments in primary and secondary markets.
  07 Jan 2009 Click to Access:  Households' wealth composition across OECD countries and financial risks borne by households
Isabelle Ynesta
The first section of this article presents a combined analysis of households’ financial and non-financial balance sheets across OECD countries over the period 1995-2006, based on two OECD data collections – financial balance sheet accounts and households’ financial and non-financial assets.

The scope of the study mainly covers households’ gross wealth (financial, dwellings and land) and therefore does not include debt. The second section, based on the OECD households’ financial and non-financial assets database, analyses financial risks borne by households investing their savings either in investment fund shares, in life insurance reserves or in pension schemes, and how these allocations have changed and developed over time in various OECD countries.
  07 Jan 2009 Click to Access:  Recent trends in institutional investors statistics
Eric Gonnard, Eun Jung Kim, Isabelle Ynesta
Data to measure and analyse the increasing role of institutional investors in capital markets has been collected and published by the OECD for a number of years.

This dataset is now integrated in the framework of the OECD Financial Accounts. This article presents an overview of institutional investors’ assets, their components and their development in the aggregate and by country.
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