OECD Journal: Financial Market Trends

Frequency :
1995-2872 (en ligne)
1995-2864 (imprimé)
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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 2011, Numéro 1 You do not have access to this content

Date de publication :
20 sep 2011

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  20 sep 2011 Cliquez pour accéder:  Fostering Long-term Investment and Economic Growth Summary of a High-Level OECD Financial Roundtable
Gert Wehinger
As the OECD is celebrating its 50th anniversary, member countries are exiting from the biggest post-war financial and economic crisis and are trying to put their economies back onto strong, sustainable footing. While financial reforms should provide for a better, more sustainable balance between stability and growth, measures to strengthen the savings-investment channel should foster sustainable growth and development. These issues were explored at a High-Level OECD Financial Roundtable and are summarised in this article. Covered are the topics of financial reform to foster stability and long-term growth, the contribution of institutional investors to long-term growth, and creating a better environment for the financing of business innovation and green growth. With strained public sector finances, private capital needs to fill the funding gap for infrastructure and other long-term projects. Appropriate regulatory incentives to overcome short-termism, as well as risk-sharing arrangements e.g. via publicprivate partnerships, are needed in order to encourage market-based, long-term investment and risk capital financing. Better transparency, information and investor education can also play a role in enhancing long-term savings and investment.
  20 sep 2011 Cliquez pour accéder:  Financial Stability, Fiscal Consolidation and Long-Term Investment after the Crisis
Franco Bassanini, Edoardo Reviglio
In the future there will be a global growing demand for long-term investment, both in mature and in emerging countries, to finance infrastructure, innovation, education, growth, environmental programs. Mature economies will also need to increase their share of long-term investment to exit from the recent crisis, to reinforce their growth rates and global competitiveness and to ensure public debt sustainability. Given the need to enlarge the amount of long-term financing worldwide, policy makers should create a prudential and accounting framework that encourages long-term investment with positive effects for growth and financial market stability. The paper then discusses regulatory issues related to the introduction of a new international and/or European regulatory framework that is more favourable or less penalising for long-term investment, and issues related to the creation of new euro denominated financial instruments for financing infrastructure (long-term equity funds, project bonds and guarantee schemes) and for strengthening stability in EU sovereign bond markets (Eurobonds).
  20 sep 2011 Cliquez pour accéder:  Lessons from the Last Financial Crisis and the Future Role of Institutional Investors
Lars Rohde
The dynamics of the financial crisis were driven by underpricing of risk and lack of transparency, which led to a loss of confidence when the bubble finally burst. Crisis resolution involved massive government interventions that caused a permanent transfer of losses to the public sector as well as sovereign-debt crises that may involve painful solutions. Letting banks fail is a necessary disciplinary factor, but this requires a well-defined "game plan" which did not exist in the crisis. Regulatory reforms underway aim at restoring confidence, but they may hamper the long-term potential of institutional investors. Nevertheless, institutional investors should still be able to provide risk capital – except for perhaps pension funds, which have been weakened by demographic developments. Finally, improving governance and reducing excessive risk-taking are important but challenging tasks. More active and involved shareholders could further these goals, but such participation will be hard to achieve. Therefore, transparent bonus and remuneration plans are perhaps the most important initiatives for preventing future systemic financial crises.
  20 sep 2011 Cliquez pour accéder:  Fostering Long-term Investment and Economic Growth
Olivier Mareuse
Active long-term investors are needed for well-functioning financial markets. Long-term investors are also essential for economic growth, as they finance infrastructure and are more likely to become engaged as active shareholders. Since long-term investments are likely to provide higher returns for pensions and long-term savings, they should be able to attract capital from pensions and other long-term savings funds, which are ample due to high savings rates in Europe. But long-term investment should also be encouraged via the regulatory framework and through fiscal incentives. Furthermore, the development of innovative financial instruments will be necessary to foster long-term investment. Finally, co-operation among long-term investors should also help to develop a new "investment culture".
  20 sep 2011 Cliquez pour accéder:  The Contribution of the Asset Management Industry to Long-term Growth
Gian Luigi Costanzo
The global asset management industry was severely hit by the worldwide financial crisis, but has recovered well from the crisis. The resiliency of the asset management industry can be explained by a more diversified industry and investors turning to greater diversification in asset classes. The asset management industry is a vital source of economic growth as intermediary in the savings-investment channel. The industry is also one of the most important providers of liquidity needed to ensure smooth functioning of capital markets and provides the means for its clients to diversify their portfolios and achieve their investment goals. Asset managers should act as the ‘stewards’ of their clients’ interest. But less ‘sticky’ liabilities tend to create short-termism of asset managers. A sound governance framework, more transparency, better communication with clients and better management of their expectations may be needed to overcome this problem. But clients themselves, at the institutional as well as retail level, will also have to adopt a more long-term view to appropriately evaluate the risk and returns of their portfolios. Vehicles for longterm retail investment need to be developed and support by fiscal and other incentives may be considered.
  20 sep 2011 Cliquez pour accéder:  Infrastructure Needs and Pension Investments
Frederic Ottesen
The life insurance and pensions sector manages large funds with a truly long time horizon. These investors therefore naturally seek long-dated assets to match their liabilities. Real assets or real cash flows are preferred in order to hedge against inflation, which is particularly relevant for pension funds in order to assure a decent purchasing power for their clients’ retirement income. Many countries have the daunting tasks of refurbishing and expanding infrastructure, maintaining and expanding public real estate – and doing this in an environmentally friendly manner. Well-conceived infrastructure investments promote productivity and efficiency in both the public and private sector and foster economic – potentially also "green" – growth. Large amounts of capital are needed. Many nations cannot tap the private capital markets as easily as before. Infrastructure investments could be the "perfect match" for a portion of pension savings. Therefore, the link between the capital at hand and its accessibility for infrastructure investments needs to be improved, via regulation, co-operation and communication that foster public-private partnerships, as well as government leadership.
  20 sep 2011 Cliquez pour accéder:  Investing in Infrastructure
Martin Stanley
Maintaining and building new infrastructure that delivers agglomerative benefits is crucial for promoting sustainable economic growth. Capital needs for infrastructure investment are massive. This capital could be sourced especially from pension funds and other institutional investors for whom infrastructure funds are attractive investment vehicles. But in order to mobilise such private capital, the public sector needs to provide the right framework, e.g. by promoting a "Regulated Asset Base" model to improve capital expenditure, by avoiding undue solvency rules and other regulatory obstacles to long-term investment, and by closing the knowledge gap with regard to infrastructure investments. Governments should also avoid crowding out private sector investment, confining interventions to projects where public risk sharing is necessary, and refrain from making frequent short-term changes to the regulatory framework.
  20 sep 2011 Cliquez pour accéder:  How to Foster Investments in Long-Term Assets such as Infrastructure
Thierry Déau
Mobilising private sector funding is essential in bridging the infrastructure funding gap. This can be done by appropriate regulation, targeted public financial support, and active involvement by institutional investors. Creating an appropriate policy framework and lifting regulatory constraints on long-term investments will foster financial stability of retirement savings systems and enable the development of strategic infrastructure projects that contribute to long-term growth. As capital markets and bank funding have dried up as sources of infrastructure financing after the global financial crisis, finding alternative long-term debt sources is critical. Private infrastructure financing can be promoted by targeted public measures and by building an infrastructure management culture amongst asset managers. Infrastructure investments also require long-term policy planning, with long-term strategic policy frameworks that exceed political cycles and are built on wide political consensus. Stable and accessible programmes of infrastructure projects and public-private partnerships (PPPs) are key in attracting private sector investors, complemented by adequate regulation.
  20 sep 2011 Cliquez pour accéder:  Creating a Better Business Environment for Financing Business, Innovation and Green Growth
Richard Pelly, Helmut Krämer-Eis
Modern economies are increasingly reliant on innovation to improve their competitiveness and generate growth. However, the financing of innovation in Europe exhibits weaknesses that have been exacerbated by the recent economic and financial crisis, and which could have a material adverse impact on economic growth if left unchecked. This paper explains the European Investment Bank Group’s role in creating a better environment for financing business, innovation and green growth. It briefly presents to the reader the current challenges, both in relation to the availability of equity financing for earlier-stage business, innovation and green growth, but also the stark evidence of a continuing gap in bank lending. Moreover, it provides examples of ways that the financing of innovation can be improved against the backdrop of a flexible, business-oriented EU framework.
  20 sep 2011 Cliquez pour accéder:  Financing Future Growth
Zvi Bodie, Marie Brière
Attracting long-term investors from the private sector or in public-private partnerships for stable long-term investment in the innovative sectors and industries needed to generate sustained growth is crucial. Long-term investors want assets that generate regular cash flows, often linked to inflation. While equities seem today less appropriate for long-term investors’ needs, particularly in the context of the recent regulatory changes, inflation-linked bonds, very-long dated conventional bonds, project bonds or specific derivatives better meet their requirements. It seems highly likely that the expansion and increasing regulation of long-term investors in both developed and emerging countries will trigger the development of new financial instruments compatible with long-term investment. While long-term investors are the natural sources of growth financing, they are not necessarily capable of assuming all the associated risks. Establishing and/or developing national or supranational institutions that can partly assume or at least structure some of these risks and thus offer end-investors the products they need is therefore essential. Strict regulation of the new markets arising from this process will also be vital.
  20 sep 2011 Cliquez pour accéder:  Promoting Longer-Term Investment by Institutional Investors
Raffaele Della Croce, Fiona Stewart, Juan Yermo
Institutional investors in OECD countries held over USD 65 trillion in assets at the end of 2009, and they are growing fast in emerging economies where Sovereign Wealth Funds still predominate as source of long-term capital. Concerns about short-termism and corporate governance have led to calls for more "responsible" and longer-term investment, especially by institutional investors that manage retirement savings. Long-term investors could provide benefits by acting counter-cyclically, engaging as active shareholders, considering environmental and other longer-term risks and by financing long-term, productive activities that support sustainable growth. This requires transformational change in investor behavior, i.e. a new "investment culture", and various major policy initiatives. This article has been designed to stimulate discussion on the benefits of long-term investing for growth, sustainable development and financial stability, and regulatory and other barriers that impede such investment. Drawing on existing OECD work and guidelines, it also puts forward tentative policy proposals to encourage long-term investing, thus preparing the ground for further analysis and data collection to be undertaken by the OECD in this area.
  20 sep 2011 Cliquez pour accéder:  Global SIFIs, Derivatives and Financial Stability
Adrian Blundell-Wignall, Paul Atkinson
This paper looks at Global Systemically Important Financial Institutions (GSIFIs) and the global derivatives business. The derivatives business has grown exponentially versus global GDP in sharp contrast to the primary securities on which derivatives are based. Inter-connectedness risk and unconstrained potential leverage remain the most urgent tasks still facing the financial reform process. Concentrated oligopolistic derivatives markets and the ability of banks to shift promises and/or use their IRB models to estimate ex-ante risk capital – capital that might be needed in the event of a crisis – undermine the intent of financial reform. Nor do netting and clearing eliminate aggregate risk of losses and bankruptcy. The paper repeats the need to implement two of the OECD’s long-standing reform recommendations: a binding leverage ratio based on equity and the separation of high risk investment banking activities from traditional banking. A derivatives transactions tax is also put forward as a possible option that would counter the cross-subsidisation of risk from the too-big-to-fail (TBTF) problem.
  20 sep 2011 Cliquez pour accéder:  Guarantee Arrangements for Financial Promises
Sebastian Schich, Byoung-Hwan Kim
Guarantees have become the preferred instrument to address many financial policy objectives. The incidence of financial sector guarantee arrangements that address specific policy objectives, such as supporting financial stability, protecting consumers and influencing credit allocations, has increased markedly over the past decades and additional schemes are under consideration. This report identifies considerations regarding consistency and affordability that policymakers should take into account before introducing additional guarantee arrangements. One of them is that the safety net cannot be expanded without limits. In fact, as regards the strength of the net of government-supported guarantees for financial promises, the wider that net is cast (without altering its other key parameters), the thinner it becomes.
  20 sep 2011 Cliquez pour accéder:  The Economic Impact of Protracted Low Interest Rates on Pension Funds and Insurance Companies
Pablo Antolin, Sebastian Schich, Juan Yermo
A period of protracted low interest rates is a feasible, even if not the most likely, scenario going forward and such a scenario would adversely affect pension funds and insurance companies. Protracted low interest rates affect investment opportunities and have a potentially significant adverse effect on life insurance companies and institutions whose liabilities consist of a fixed investment return or benefit promises, such as is the case for defined-benefit pension funds. It cannot be ruled out that the financial institutions affected engage in "gambling for redemption" in an attempt to match the level of return promised to beneficiaries when financial markets were more elevated.
  20 sep 2011 Cliquez pour accéder:  Outlook for the Securitisation Market
Hans J. Blommestein, Ahmet Keskinler, Carrick Lucas
Securitisation issuance has slumped in recent years, with the market having become increasingly dependent on central bank and government support in both Europe and the United States. Despite facing a number of threats that could inhibit a recovery in the shorter term, the securitisation market is expected to recover over a longer term horizon. Funding costs have improved, but investor confidence in the asset class remains weak, and the impact of regulatory reform is as yet difficult to fully assess. A long-term sustainable recovery for the securitisation market remains in the hands of regulators and policy makers. They must be awake to the possibility that a recovery in securitisation markets could be a prerequisite to unlocking credit markets in general and supporting a wider global economic recovery.
  20 sep 2011 Cliquez pour accéder:  OECD Statistical Yearbook on African Central Government Debt
Hans J. Blommestein, Perla Ibarlucea Flores
The borrowing requirements of African governments in financing their budget deficits are increasingly met by selling marketable instruments but also by the issuance of non-marketable debt in the form of bi-lateral, multilateral and concessional loans. The second edition of the OECD Statistical Yearbook on African Central Government Debt provides comprehensive quantitative information on African central government debt instruments, including both marketable and non-marketable debt. Individual country data are presented in a comprehensive standard framework to facilitate cross-country comparison.
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