Forum for Science, Industry and Business

Sponsored by:     3M 
Search our Site:

 

Nationalizing banks will not restore health to the banking sector

30.10.2008
The current credit crisis has intensified politicians’ interest in the goings-on in the financial sector. Research has shown that quick and decisive action on their part is needed to avoid serious economic consequences of the current banking crisis. Economist Thorsten Beck will issue words of caution about the wave of nationalization of banks in Europe in his inaugural lecture at Tilburg University that he will deliver on 7 November.

Beck sees the current crisis more as the result of the failure of government rather than the market. Central bankers and bank supervisors, especially in the United States, reassured investors time and again that they would intervene with monetary and financial policies if circumstances so dictated.

These assurances gave bankers the leeway, even incentives, to take aggressive and imprudent risks. Beck suggests that in the future financial institutions be required to be more transparent and to take on more responsibility for their own risks. This approach is more fruitful than prohibiting certain activities, which will prevent society reaping the benefits of thriving financial markets.

Beck also argues that the nationalization of banks may currently be necessary, but that this process will not help by itself the sector regain health and independence in the long term. Bureaucrats are poor bankers, according to Beck, and nationalization should not be the first solution attempted. Private-market players must get involved in the resolution of these banks as quickly as possible in order to help the sector get back on its feet.

Establishment of a European financial institute
The national approach to the European banking crisis has proven to be ineffective, says Beck. A large part of the European banking system and its related transactions take place across national borders, whereas supervision and deposit insurance coverage are still on the level of individual member states. This leads to serious problems in times of crisis, as demonstrated in the case of the Icelandic banks or even the Benelux bank Fortis. Resolution of large European banks can only take place at the European level, while bank nationalizations will eventually lead to renewed fragmentation in the European financial system.

This is why Beck advocates establishing an institute at European level to monitor large financial institutions that operate across borders. An institution of this kind must have sufficient fiscal resources available, provided by the banks in question. This approach will help avoid European internal political conflicts at the time of crisis.

Thorsten Beck recently joined Tilburg University in the Netherlands from the World Bank in Washington, D.C. He is chairman of the European Banking Center, a research institute in Tilburg. His research has focused on two main questions: What is the relationship between financial development and economic development? What are the ingredients of an efficient and stable financial system? He holds a master degree from Germany and a Ph.D. from the University of Virginia. During his time at the World Bank, Beck has accumulated significant experience in financial sector policy work across Africa and Latin America, but also in Russia and China.

Corine Schouten | alfa
Further information:
http://www.tilburguniversity.nl/news/pressreleases

More articles from Business and Finance:

nachricht Preferential trade agreements enhance global trade at the expense of its resilience
17.02.2017 | International Institute for Applied Systems Analysis (IIASA)

nachricht How Strong Brands Translate into Money
15.11.2016 | Kühne Logistics University - Wissenschaftliche Hochschule für Logistik und Unternehmensführung

All articles from Business and Finance >>>

The most recent press releases about innovation >>>

Die letzten 5 Focus-News des innovations-reports im Überblick:

Im Focus: Breakthrough with a chain of gold atoms

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

In the field of nanoscience, an international team of physicists with participants from Konstanz has achieved a breakthrough in understanding heat transport

Im Focus: DNA repair: a new letter in the cell alphabet

Results reveal how discoveries may be hidden in scientific “blind spots”

Cells need to repair damaged DNA in our genes to prevent the development of cancer and other diseases. Our cells therefore activate and send “repair-proteins”...

Im Focus: Dresdner scientists print tomorrow’s world

The Fraunhofer IWS Dresden and Technische Universität Dresden inaugurated their jointly operated Center for Additive Manufacturing Dresden (AMCD) with a festive ceremony on February 7, 2017. Scientists from various disciplines perform research on materials, additive manufacturing processes and innovative technologies, which build up components in a layer by layer process. This technology opens up new horizons for component design and combinations of functions. For example during fabrication, electrical conductors and sensors are already able to be additively manufactured into components. They provide information about stress conditions of a product during operation.

The 3D-printing technology, or additive manufacturing as it is often called, has long made the step out of scientific research laboratories into industrial...

Im Focus: Mimicking nature's cellular architectures via 3-D printing

Research offers new level of control over the structure of 3-D printed materials

Nature does amazing things with limited design materials. Grass, for example, can support its own weight, resist strong wind loads, and recover after being...

Im Focus: Three Magnetic States for Each Hole

Nanometer-scale magnetic perforated grids could create new possibilities for computing. Together with international colleagues, scientists from the Helmholtz Zentrum Dresden-Rossendorf (HZDR) have shown how a cobalt grid can be reliably programmed at room temperature. In addition they discovered that for every hole ("antidot") three magnetic states can be configured. The results have been published in the journal "Scientific Reports".

Physicist Dr. Rantej Bali from the HZDR, together with scientists from Singapore and Australia, designed a special grid structure in a thin layer of cobalt in...

All Focus news of the innovation-report >>>

Anzeige

Anzeige

Event News

Booth and panel discussion – The Lindau Nobel Laureate Meetings at the AAAS 2017 Annual Meeting

13.02.2017 | Event News

Complex Loading versus Hidden Reserves

10.02.2017 | Event News

International Conference on Crystal Growth in Freiburg

09.02.2017 | Event News

 
Latest News

Microhotplates for a smart gas sensor

22.02.2017 | Power and Electrical Engineering

Scientists unlock ability to generate new sensory hair cells

22.02.2017 | Life Sciences

Prediction: More gas-giants will be found orbiting Sun-like stars

22.02.2017 | Physics and Astronomy

VideoLinks
B2B-VideoLinks
More VideoLinks >>>