The latest edition of the Federal Reserve Bank of New York’s Economic Policy Review is available. Beyond Pillar 3 in International Banking Regulation: Disclosure and Market Discipline of Financial Firms contains the proceedings of a conference cosponsored by the Federal Reserve Bank of New York and the Jerome A. Chazen Institute of International Business at Columbia Business School, held on
October 2-3, 2003.
The Basel II Accord, the new bank regulatory regime now in final development, rests upon three pillars: 1) adequate bank capital, 2) supervisory review of bank capital, and 3) disclosure and market discipline of banks. The first two pillars have been highly scrutinized already, hence the focus here on Pillar 3: disclosure of information about prospects and risks by banks to investors and the discipline that investors apply in response.
A theme emerged from several papers: the strength of investor discipline depends on supervisory discipline, and vice versa. If investors can expect supervisors to take prompt corrective action toward troubled banks, supervisors can rely on investors, via signals from bank bond and stock prices, to help identify those banks.
Contents of the volume:
- Opening Remarks
by Jamie B. Stewart, Jr., of the Federal Reserve Bank of New York (first vice president from 1999 through early 2004)
2 pages / 47 kb - Conference Overview and Summary of Papers by conference organizers Donald P. Morgan of the Federal Reserve Bank of New York and Frederic S. Mishkin of Columbia University
4 pages / 52kb - Rebalancing the Three Pillars of Basel II by Jean-Charles Rochet of Toulouse University and Institute d’Economie Industrielle
15 pages / 177 kb
Commentary: Darryll Hendricks of the Federal Reserve Bank of New York; Jeremy C. Stein of Harvard University
- Disclosure, Volatility, and Transparency: An Empirical Investigation into the Value of Bank Disclosure by Ursel Baumann and Erlend Nier of the Bank of England
15 pages / 138 kbCommentary: Charles W. Calomiris of Columbia University; Eric Rosengren of the Federal Reserve Bank of Boston
- Market Indicators, Bank Fragility, and Indirect Market Discipline by Reint Gropp and Jukka Vesala of the European Central Bank and Giuseppe Vulpes of UniCredit Banca d’Impresa
10 pages / 135 kbCommentary: Mark J. Flannery of the University of Florida; Jose A. Lopez of the Federal Reserve Bank of San Francisco
- A Reconsideration of the Risk Sensitivity of U.S. Banking Organization Subordinated Debt Spreads by Daniel M. Covitz, Diana Hancock, and Myron L. Kwast of the Board of Governors of the Federal Reserve System
20 pages / 201 kbCommentary
Kevin J. Stiroh of the Federal Reserve Bank of New York
3 pages / 41 kb - Risk and Return of Publicly Held versus Privately Owned Banks by Simon H. Kwan of the Federal Reserve Bank of San Francisco
11 pages / 95 kbCommentary
Philip E. Strahan of Boston College
5 pages / 62 kb
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