Abstract
The chapter provides an overview of the salient features of the Global Financial Crisis (GFC), which may be seen as a fundamental cut-off point in the legislation of markets, both in the USA and the European Union. The trouble interrupted a trend of apparent long-term growth, rapidly spreading negative spill-overs onto the so-called “real” economy. When the GFC broke out, new instruments and activities had arisen; new subjects had entered the investment industry; and regulators were desperately trying to keep on track with technology-driven financial innovation. Supervisors have powerfully intervened to halt the crisis: in particular, they have addressed some structural issues in finance (lack of transparency, insufficient protection afforded to investors, etc.). As a result, the business models of several intermediaries have been disrupted. The chapter discusses the main macro-financial characteristics of the years usually labelled as Great Moderation (GM): ‘easy credit’ practices, liquidity created by means of assets furtherly revealed to be illiquid, and a loose monetary policy fuelling the other two phenomena. Then, it analyses the propagation of the GFC, with a focus on credit institutions and the threats (e.g., shadow banking) that traditional players have been facing over recent years.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Ackermann, J. (2008). The subprime crisis and its consequences. Journal of Financial Stability, 4(4), 329–337.
Asquini, A. (1959). I battelli del Reno. Milano: Giuffrè.
Bogle, J. C. (2008). Black Monday and black swans. Financial Analysts Journal, 64, 30–40.
Bastiat, F. (1850). Which is seen, and that which is not seen [original French: Ce qu’on voit et ce qu’on ne voit pas]. Translated by Patrick James Stirling.
Black, S. E., & Strahan, P. E. (2001). The division of spoils: Rent-sharing and discrimination in a regulated industry. American Economic Review, 91(4), 814–831.
Borio, C., & Disyatat, P. (2011). Global Imbalances and the Financial Crisis: Link or no link? BIS Working Paper No. 346.
Cabral, R. (2013). A perspective on the symptoms and causes of the financial crisis. Journal of Banking & Finance, 37(1), 103–117.
Caporale, G. M., & Kontonikas, A. (2009). The Euro and inflation uncertainty in the European Monetary Union. Journal of International Money and finance, 28(6), 954–971.
Committee of European Banking Supervisors, First part of CEBS’s technical advice to the European Commission on liquidity risk management: Survey of the current regulatory frameworks adopted by the EEA regulators, 15 August 2007.
Committee of Wise Men on the Regulation of European Securities Markets, Lamfalussy, A., & Wright, D. (2001). Final report of the Committee of Wise Men on the regulation of European Securities Markets.
Demirgüç-Kunt, A., & Servén, L. (2009). Are all the sacred cows dead? Implications of the financial crisis for macro and financial policies. The World Bank.
Diamond, D. W., & Rajan, R. G. (2009). The credit crisis: Conjectures about causes and remedies. American Economic Review, 99(2), 606–610.
Dyck, A., Volchkova, N., & Zingales, L. (2008). The corporate governance role of the media: Evidence from Russia. The Journal of Finance, 63(3), 1093–1135.
European Commission, Impact assessment accompanying the Proposal for a Directive of the European Parliament and of the Council on Markets in financial instruments [Recast] and the Proposal for a Regulation of the European Parliament and of the Council on Markets in financial instruments. SEC (2011) 1226 final, Commission Staff Working Paper.
European Systemic Risk Board, Recommendation of 18 June 2014 on guidance for setting countercyclical buffer rates (ESRB/2014/1).
Ferguson, N. (2018). The square and the tower: Networks and power, from the freemasons to Facebook. London: Penguin.
Feinman, J. N. (1993). Reserve requirements: History, current practice, and potential reform. Federal Reserve Bulletin, 79, 569.
Foote, C. L., Gerardi, K., & Willen, P. (2008). Negative equity and foreclosure: Theory and evidence.
Friedman, M. (1962). Capitalism and freedom: With the assistance of Rose D. Friedman. University of Chicago Press.
Fukuyama, F. (2016). American political decay or renewal: The meaning of the 2016 election. Foreign Affairs, 95, 58.
Gennaioli, N., & Shleifer, A. (2010). What comes to mind. The Quarterly Journal of Economics, 125(4), 1399–1433.
González-Cabanillas, L., & Ruscher, E. (2008). The Great Moderation in the euro area: What role have macroeconomic policies played? (No. 331). Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
Gordon, J. S. (2000). The great game: The emergence of Wall Street as a world power: 1653–2000. New York: Scribner.
Jagannathan, R., Kapoor, M., & Schaumburg, E. (2013). Causes of the great recession of 2007–2009: The financial crisis was the symptom not the disease! Journal of Financial Intermediation, 22(1), 4–29.
Jayaratne, J., & Strahan, P. E. (1996). The finance-growth nexus: Evidence from bank branch deregulation. The Quarterly Journal of Economics, 111(3), 639–670.
Jayaratne, J., & Strahan, P. E. (1998). Entry restrictions, industry evolution, and dynamic efficiency: Evidence from commercial banking. The Journal of Law and Economics, 41(1), 239–274.
Keynes, J. M. (1936). The general theory of employment, interest and money. London: Palgrave Macmillan.
King, M. (2016). The end of alchemy. London: Little Brown.
Kim, T., Koo, B., & Park, M. (2013). Role of financial regulation and innovation in the financial crisis. Journal of Financial stability, 9(4), 662–672.
Lestano, L., Jacobs, J., & Kuper, G. (2003). Indicators of financial crises do work! An early-warning system for six Asian countries. CCSO Working Paper 2003/13, University of Groningen, Netherlands.
Levine, R. (2002). Bank-based or market-based financial systems: which is better? (No. w9138). National Bureau of Economic Research.
Mitchell Waldrop, M. (1987). Computers amplify Black Monday. Science, 238(4827), 602–604.
Moshirian, F. (2011). The global financial crisis and the evolution of markets, institutions and regulation. Journal of Banking & Finance, 35(3), 502–511.
Obstfeld, M., & Taylor, A. (2004). Global capital markets: Integration, crisis and growth. Cambridge: Cambridge University Press.
Onado, M. (2017). Alla ricerca della banca perduta. Il Mulino.
Palumbo, M. G., & Parker, J. A. (2009). The integrated financial and real system of national accounts for the United States: does it presage the financial crisis? American Economic Review, 99(2), 80–86.
Rajan, R. G. (2006). Has finance made the world riskier? European Financial Management, 12(4), 499–533.
Rochet, J.-C. (2010). The future of banking regulation. In M. Dewatripont, J.-C. Rochet, & J. Tirole (Eds.), Balancing the banks: Global lessons from the financial crisis. Princeton, NJ: Princeton University Press.
Saunders, A., Strock, E., & Travlos, N. G. (1990). Ownership structure, deregulation, and bank risk taking. The Journal of Finance, 45(2), 643–654.
Scott, H. S. (2010). Reducing systemic risk through the reform of capital regulation. Journal of International Economic Law, 13(3), 763–778.
Shin, H.-S. (2011). Global banking glut and loan risk premium. In: Mundell-Fleming (Lecture), 12th Jacques Polak Annual Research Conference, International Monetary Fund, Washington, DC.
Shleifer, A., & Vishny, R. (1998). The grabbing hand. Cambridge, MS: Harvard University Press.
Turner, A. (2017). Between debt and the devil: Money, credit, and fixing global finance. Princeton, NJ: Princeton University Press.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2019 Springer Nature Switzerland AG
About this chapter
Cite this chapter
Comana, M., Previtali, D., Bellardini, L. (2019). Why the Package? Financial Markets Before and After the Crisis. In: The MiFID II Framework. Springer, Cham. https://doi.org/10.1007/978-3-030-12504-2_2
Download citation
DOI: https://doi.org/10.1007/978-3-030-12504-2_2
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-030-12503-5
Online ISBN: 978-3-030-12504-2
eBook Packages: Economics and FinanceEconomics and Finance (R0)