The Biodiversity Crisis

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The customers borrowing behavior during the financial crisis  Alina LUCA (BRTUCU) The Bucharest University of Economic Studies alinabratucu@yahoo.com  Abstract. The global financial crisis determined the transition of the Romanian banking system from excess of liquidity to deficit, namely from an aggressive lending activity to a significant reduction of credit growth rate. In our country, the high indebtedness rate, especially in foreign currencies, is the main vulnerable spot of the population sector. The main objective of this paperwork is to analyze factors that influence the customers in their decision to borrow in foreign currencies or in Ron. In this matter, it was used a regional econometric model for panel data in order to see Romania’s customers borrowing preferences and to analyze if the crises have changed their behavior. Keywords: financial crisis; banking system; borrowing behaviour; regional economy. JEL Codes: R1, G21, E5. REL Codes: 11C, 11E. Theoretical and Applied Economics Volume XX (2013), No. 5(582), pp. 115-124 Alina Luca (Brtucu)  116 Introduction The banks practice of an aggressive selling in foreign currency made the evolution of the exchange rate the new obsession of the Romanians. The big percentage of debts in foreign currency amplifies the vulnerability of the indebtedness. The main problem is that the flow for the new loans approved by banks is also in foreign currency (2011-2012). The National Bank of Romania showed in its reports that the mortgage loans and the consumer ones are approved in majority in foreign currency. Also, the “First House” program contributed to this evolution. This paper tries to identify the factors that influence the consumers in their decision of borrow a loan in another currency than RON. Macroeconomic background At the end of 2008, money market was affected by the global financial crisis and the reduction of the external financing forced the banks to rethink their strategies. Although in the first half of the year was registered a rapid expansion of the credit for private sector, this decreased in intensity in the last quarter, reaching 33.7% in December. Figure 1. Loans in foreign and national currency in Romania at April 2008 (LFO-loans in foreign currency, LRO-loans in RON) After analyses of the international financial crisis conjuncture and of the internal competition existing at the time, it can be said that the banking system during 2008 went from excess of liquidity to deficit, from excessive lending to significant restrain of the growth rate for credit and offers for deposits. In terms of credit growth rate, it was found an important reduction compared with 2007 45% 55% Loansinforeignandnationalcurrency_Romania_2008.04 LRO LFO The customers borrowing behavior durig the financial crisis    117 but the deterioration of loan portfolio could not be avoided. This is why 2008 worth to be study. National Bank of Romania (Annual Report 2008, p. 27) revealed that for retail sector the preferred loans are those on long term, in foreign currency and for consumption. Also, in 2008 the new offered products had promotional interest rates, indicating a delay of the debt impact in a future period. The contagion effects of the external crisis revealed many of the unresolved internal problems of the Romanian economy and produced many changes in the labor market, not only at national level but at regional The Biodiversity Crisis The Biodiversity Crisis Bởi: OpenStaxCollege Traditionally, ecologists have measured biodiversity, a general term for the variety present in the biosphere, by taking into account both the number of species and their commonness Biodiversity can be estimated at a number of levels of organization of living things These estimation indexes, which came from information theory, are most useful as a first step in quantifying biodiversity between and within ecosystems; they are less useful when the main concern among conservation biologists is simply the loss of biodiversity However, biologists recognize that measures of biodiversity, in terms of species diversity, may help focus efforts to preserve the biologically or technologically important elements of biodiversity The Lake Victoria cichlids provide an example through which we can begin to understand biodiversity The biologists studying cichlids in the 1980s discovered hundreds of cichlid species representing a variety of specializations to particular habitat types and specific feeding strategies: eating plankton floating in the water, scraping and then eating algae from rocks, eating insect larvae from the bottom, and eating the eggs of other species of cichlid The cichlids of Lake Victoria are the product of an adaptive radiation An adaptive radiation is a rapid (less than three million years in the case of the Lake Victoria cichlids) branching through speciation of a phylogenetic tree into many closely related species; typically, the species “radiate” into different habitats and niches The Galápagos finches are an example of a modest adaptive radiation with 15 species The cichlids of Lake Victoria are an example of a spectacular adaptive radiation that includes about 500 species At the time biologists were making this discovery, some species began to quickly disappear A culprit in these declines was a species of large fish that was introduced to Lake Victoria by fisheries to feed the people living around the lake The Nile perch was introduced in 1963, but lay low until the 1980s when its populations began to surge The Nile perch population grew by consuming cichlids, driving species after species to the point of extinction (the disappearance of a species) In fact, there were several factors that played a role in the extinction of perhaps 200 cichlid species in Lake Victoria: the Nile perch, declining lake water quality due to agriculture and land clearing on the shores of Lake Victoria, and increased fishing pressure Scientists had not even catalogued all of the species present—so many were lost that were never named The diversity is now a shadow of what it once was 1/17 The Biodiversity Crisis The cichlids of Lake Victoria are a thumbnail sketch of contemporary rapid species loss that occurs all over Earth and is caused by human activity Extinction is a natural process of macroevolution that occurs at the rate of about one out of million species becoming extinct per year The fossil record reveals that there have been five periods of mass extinction in history with much higher rates of species loss, and the rate of species loss today is comparable to those periods of mass extinction However, there is a major difference between the previous mass extinctions and the current extinction we are experiencing: human activity Specifically, three human activities have a major impact: destruction of habitat, introduction of exotic species, and over-harvesting Predictions of species loss within the next century, a tiny amount of time on geological timescales, range from 10 percent to 50 percent Extinctions on this scale have only happened five other times in the history of the planet, and they have been caused by cataclysmic events that changed the course of the history of life in each instance Earth is now in one of those times Types of Biodiversity Scientists generally accept that the term biodiversity describes the number and kinds of species in a location or on the planet Species can be difficult to define, but most biologists still feel comfortable with the concept and are able to identify and count eukaryotic species in most contexts Biologists have also identified alternate measures of biodiversity, some of which are important for planning how to preserve biodiversity Genetic diversity is one of those alternate concepts Genetic diversity or variation is the raw material for adaptation in a species A species’ future potential for adaptation depends on the genetic diversity held in the genomes of the individuals in populations that make up the species The same is true for higher taxonomic categories A genus with very different types of species will have more genetic diversity than a genus with species that look alike and have similar ecologies If there were a choice between one of these genera of species being preserved, the one with the greatest potential for subsequent evolution is the most genetically diverse one It would be ideal not to ...27 Central bank rates, market rates and retail bank rates in the euro area in the Context of the reCent Crisis Central bank rates, market rates and retail bank rates in the euro area in the context of the recent crisis N. Cordemans M. de Sola Perea (1) Trichet (2009). Introduction The economic and financial crisis that arose in summer 2007 led to a significant increase in perceptions of risk in the economy, resulting in a sizeable rise in risk and liquidity premia on credit markets. Given the nature of the crisis, the financial sector was particularly affected, with respect to its financing via both the money market and the bond market, which may have had an impact on the retail interest rates offered by banks to busi- nesses and households. Similarly, the sovereign debt crisis that appeared in late 2009 may have had an impact on financing costs in the private sector, insofar as sovereign bond yields are often used as a reference for other inter- est rates in the economy. The financial crisis, along with the contagion effects of the sovereign debt crisis on the banking sector, has also affected bank balance sheets and weighed on their liquidity and solvency ratios. This may have led banks to restrict the supply of credit or increase their rate margins. Against this backdrop, this article addresses recent trends in the financing costs of various public and private sectors in the euro area and Belgium. It pays particular attention to the monetary policy transmission process via the inter- est rate channel during the crisis and notably examines the extent to which the process was affected by tensions on sovereign debt markets. Furthermore, this article looks at certain unconventional monetary policy decisions adopted in the euro area (full liquidity allotment, longer- term refinancing operations, covered bond purchases and, more recently, the Securities Markets Programme). Whereas some of these measures caused interest rates to fall further, they were implemented primarily to keep the monetary policy transmission mechanism functioning properly (1) . The first part of the article deals with the relation- ship between Eurosystem monetary policy decisions and market interest rates. It looks, on the one hand, at the links between central bank rates and money market rates and, on the other hand, at the trend during the crisis of the risk-free yield curve, i.e. that of AAA-rated euro area government bonds. The second section addresses the question of long-term market rates harbouring credit risk. We examine the financing costs of the public sector and the financial and non-financial private sector, as well as the relationship between the two, at both the euro area and national levels. Lastly, part three is devoted to retail bank interest rates. Using an econometric analysis, it seeks to evaluate the impact of the financial crisis and the sover- eign debt crisis on lending and deposit rates, at the level of the euro area in general and Please cite this paper as: Hüfner, F. (2010), “The German Banking System: Lessons from the Financial Crisis”, OECD Economics Department Working Papers, No. 788, OECD Publishing. http://dx.doi.org/10.1787/5kmbm80pjkd6-en OECD Economics Department Working Papers No. 788 The German Banking System: Lessons from the Financial Crisis Felix Hüfner JEL Classification: G01, G15, G21, G38 Unclassified ECO/WKP(2010)44 Organisation de Coopération et de Développement Économiques Organisation for Economic Co-operation and Development 01-Jul-2010 ___________________________________________________________________________________________ English - Or. English ECONOMICS DEPARTMENT THE GERMAN BANKING SYSTEM: LESSONS FROM THE FINANCIAL CRISIS ECONOMICS DEPARTMENT WORKING PAPERS No. 788 by Felix Hüfner All Economics Department Working Papers are available through the OECD internet website at www.oecd.org/WorkingPapers JT03286392 Document complet disponible sur OLIS dans son format d'origine Complete document available on OLIS in its original format ECO/WKP(2010)44 Unclassified English - Or. English ECO/WKP(2010)44 2 SUMMARY/RESUME The German banking system: lessons from the financial crisis The German banking system came under pressure during the financial crisis, not least due to its significant exposure to toxic assets which originated in the US. In the short run, the stability of the system has been achieved, in large part through substantial government support measures. However, ensuring adequate capitalization of the banking system remains a major challenge going forward and may require more active government involvement. The underlying causes of the banking sector problems are related to: i) the activities of the Landesbanken which benefitted from government guarantees without a proper business model; ii) weak capitalization and high fragmentation of the whole banking system, possibly related to the particularly rigid three-pillar structure; and iii) deficiencies in banking regulation and supervision. The challenge is to address these three causes in order to raise the long-run stability of the banking system. This paper relates to the 2010 OECD Economic Review of Germany (www.oecd.org/eco/surveys/germany ). JEL Classification: G01; G15; G21; G38; Key words: Landesbanken; banking sector; financial stability; banking supervision; financial crisis; ********************** Le système bancaire : les leçons de la crise financière Le système bancaire allemand a subi des tensions durant la crise financière, notamment en raison de sa forte exposition à des actifs toxiques générés aux États-Unis. À court terme, la stabilité du système a pu être assurée en grande partie au moyen de mesures substantielles de soutien de la part du gouvernement. Néanmoins, parvenir à une capitalisation convenable du système bancaire reste un défi majeur pour la période à venir et nécessitera sans doute une intervention plus active des pouvoirs publics. Les causes profondes des problèmes du système bancaire sont liées aux facteurs suivants : i) les activités des Landesbanken qui ont bénéficié des garanties de l’État sans avoir de véritable modèle économique ; ii) la capitalisation et la rentabilité médiocres du système bancaire dans son ensemble, éventuellement liée à son organisation particulièrement rigide autour de trois piliers ; et iii) les carences de la réglementation et du BIS Working Papers No 346 Global imbalances and the financial crisis: Link or no link? by Claudio Borio and Piti Disyatat Monetary and Economic Department May 2011 JEL classification: E40, E43, E44, E50, E52, F30, F40. Keywords: Global imbalances, saving glut, money, credit, capital flows, current account, interest rates, financial crisis. BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. Copies of publications are available from: Bank for International Settlements Communications CH-4002 Basel, Switzerland E-mail: publications@bis.org Fax: +41 61 280 9100 and +41 61 280 8100 This publication is available on the BIS website ( www.bis.org ). © Bank for International Settlements 2011. All rights reserved. Brief excerpts may be reproduced or translated provided the source is stated. ISSN 1020-0959 (print) ISBN 1682-7678 (online) iii Global imbalances and the financial crisis: Link or no link? 1 Claudio Borio and Piti Disyatat 2 Abstract Global current account imbalances have been at the forefront of policy debates over the past few years. Many observers have recently singled them out as a key factor contributing to the global financial crisis. Current account surpluses in several emerging market economies are said to have helped fuel the credit booms and risk-taking in the major advanced deficit countries at the core of the crisis, by putting significant downward pressure on world interest rates and/or by simply financing the booms in those countries (the “excess saving” view). We argue that this perspective on global imbalances bears reconsideration. We highlight two conceptual problems: (i) drawing inferences about a country’s cross-border financing activity based on observations of net capital flows; and (ii) explaining market interest rates through the saving-investment framework. We trace the shortcomings of this perspective to a failure to consider the distinguishing characteristics of a monetary economy. We conjecture that the main contributing factor to the financial crisis was not “excess saving” but the “excess elasticity” of the international monetary and financial system: the monetary and financial regimes in place failed to restrain the build-up of unsustainable credit and asset price booms (“financial imbalances”). Credit creation, a defining feature of a monetary economy, plays a key role in this story. JEL Classification: E40, E43, E44, E50, E52, F30, F40. Keywords: Global imbalances, saving glut, money, credit, capital flows, current account, interest rates, financial crisis. 1 An abridged version of this paper has been published with the title “Global imbalances and the financial crisis: Reassessing the role of international finance” in Asian Economic Policy Review (2010) vol. 5, no. 2. This version has been significantly revised. We would like to thank Stephen Cecchetti, Anthony Courakis, Andrew Crockett, Ettore Dorrucci, Mitsuhiro Fukao, Joseph Gagnon, Martin Hellwig, Peter Hördahl, Don Kohn, David Laidler, Axel Leijonhufvud, Bob McCauley, Pat The Financial Crisis: A Timeline of Events and Policy Actions February 27, 2007 | Freddie Mac Press Release The Federal Home Loan Mortgage Corporation (Freddie Mac) announces that it will no longer buy the most risky subprime mortgages and mortgage-related securities. April 2, 2007 | SEC Filing New Century Financial Corporation, a leading subprime mortgage lender, files for Chapter 11 bankruptcy protection. June 1, 2007 | Congressional Testimony Standard and Poor’s and Moody’s Investor Services downgrade over 100 bonds backed by second-lien subprime mortgages. June 7, 2007 Bear Stearns informs investors that it is suspending redemptions from its High-Grade Structured Credit Strategies Enhanced Leverage Fund. June 28, 2007 | Federal Reserve Press Release The Federal Open Market Committee (FOMC) votes to maintain its target for the federal funds rate at 5.25 percent. July 11, 2007 | Standard and Poor’s Ratings Direct Standard and Poor’s places 612 securities backed by subprime residential mortgages on a credit watch. July 24, 2007 | SEC Filing Countrywide Financial Corporation warns of “difficult conditions.” July 31, 2007 | U.S. Bankruptcy Filing Bear Stearns liquidates two hedge funds that invested in various types of mortgage-backed securities. August 6, 2007 | SEC Filing Page 1 of 32 August 6, 2007 | SEC Filing American Home Mortgage Investment Corporation files for Chapter 11 bankruptcy protection. August 7, 2007 | Federal Reserve Press Release The FOMC votes to maintain its target for the federal funds rate at 5.25 percent. August 9, 2007 | BNP Paribas Press Release BNP Paribas, France’s largest bank, halts redemptions on three investment funds. August 10, 2007 | Federal Reserve Press Release The Federal Reserve Board announces that it “will provide reserves as necessary…to promote trading in the federal funds market at rates close to the FOMC’s target rate of 5.25 percent. In current circumstances, depository institutions may experience unusual funding needs because of dislocations in money and credit markets. As always, the discount window is available as a source of funding.” August 16, 2007 | SEC Filing Fitch Ratings downgrades Countrywide Financial Corporation to BBB+, its third lowest investment-grade rating, and Countrywide borrows the entire $11.5 billion available in its credit lines with other banks. August 17, 2007 | Federal Reserve Press Release The Federal Reserve Board votes to reduce the primary credit rate 50 basis points to 5.75 percent, bringing the rate to only 50 basis points above the FOMC’s federal funds rate target. The Board also increases the maximum primary credit borrowing term to 30 days, renewable by the borrower. September 14, 2007 | United Kingdom Treasury Department Press Release The Chancellor of the Exchequer authorizes the Bank of England to provide liquidity support for Northern Rock, the United Kingdom’s fifth-largest mortgage lender. September 18, 2007 | Federal Reserve Press Release The FOMC votes to reduce its target for the federal funds rate 50 basis points to 4.75 percent. The Federal Reserve Board votes to reduce the primary credit rate 50 basis points to 5.25 percent. October 10, 2007 | Hope Now Press Release | Treasury Department Press Release U.S. Treasury Secretary Paulson announces the HOPE NOW initiative, an alliance of investors, servicers, mortgage market participants, and credit and homeowners’ counselors encouraged by the Treasury Department and the Department of Housing and Urban Development. Page 2 of 32 October 15, 2007 | Bank of America Press Release Citigroup, Bank of ... another reflects the dramatic loss of species and the gradual origin of new species These transitions can be seen in the rock strata [link] provides data on the five mass extinctions 9/17 The Biodiversity. .. dramatically altered Earth’s biodiversity makeup and the course of evolution 10/17 The Biodiversity Crisis The causes of the Triassic–Jurassic extinction event are not clear and hypotheses of climate change,... with the expansion of the European colonies since the 1500s One of the earlier and popularly known examples is the dodo bird The dodo bird lived in the forests of Mauritius, an island in the Indian