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1. The quickly fading memory of why and when bank capital is important

Author:
Jesper Berg, Nicolas Boivin, and Hans Geeroms
Publication Date:
04-2025
Content Type:
Working Paper
Institution:
Bruegel
Abstract:
Less than fifteen years after the global financial crisis of 2007-2008, banks and policymakers are calling for deregulation and lower capital requirements in the financial sector. They dispute that the Basel framework, the global standards for regulating large international banks, should be implemented fully in the European Union. One concern is that stricter capital regulation will affect the competitiveness of European banks compared to those in the United States and will restrict loan provision in the EU, despite Europe’s significant investment gap. However, deregulation should not be confused with reducing capital requirements for banks. On balance, there is only limited empirical evidence that respecting the capital requirements necessary to support financial stability hampers credit to the economy, investment or economic growth in the long term. Only well-capitalised banks can continue financing the economy during economic setbacks, and weakening the implementation of the Basel standards increases the risks of a new financial crisis. Bank lending and access to financing surveys also show there is no credit crunch in the euro area at present and that capital requirements are not the primary constraint on credit provision. A detailed look at current banking regulation does not support the conclusion that European banks are more strictly regulated overall than US banks. A direct comparison suggests rather the opposite. However, the compliance cost incurred by EU banks from current banking regulation can be reduced by simplifying EU rules.
Topic:
Markets, Financial Crisis, European Union, Regulation, Capital, and Banking
Political Geography:
Europe

2. State Aid, R&D, and the Digital Content of Trade

Author:
Chiara Castelli, Dario Guarascio, Stefan Jestl, and Robert Stehrer
Publication Date:
11-2023
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
We test for the role of state aid as a driver of digital competitiveness at the industry level, focusing on the digital factor content of trade. Results show that state aid may increase digital competitiveness, particularly in R&D-intensive industries and in relation to the export of (digital) capital-intensive goods and services. Interestingly, aggregate state aid appears to be more effective than specific R&D funds in explaining the performance of country-industries in foreign markets.
Topic:
International Trade and Finance, European Union, Trade, Industry, Capital, and Research and Development
Political Geography:
Europe

3. Privilege, Economy and State in Old Regime France: An Interview with Lewis Wade

Author:
Tehreem Husain and Lewis Wade
Publication Date:
12-2023
Content Type:
Commentary and Analysis
Institution:
The Toynbee Prize Foundation
Abstract:
Dr. Lewis Wade’s new book Privilege, Economy and State in Old Regime France: Marine Insurance, War and the Atlantic Empire under Louis XIV (Boydell and Brewer, 2023) closely analyses the rise and fall of Louis XIV's marine insurance institutions in Paris, which were central to the French monarchy's efforts to stimulate commerce, colonial enterprise and economic growth. The book discusses two leading ministers, Jean-Baptiste Colbert and his son, the Marquis de Seignelay who both recognised that marine insurance was crucial for protecting commercial investment in French maritime endeavours. While Colbert looked to private enterprise to lure capital away from passive investments in state debt towards the marine insurance industry. Seignelay, by contrast, leveraged the tools of privilege on which the French economy was built by creating the first chartered company in the history of marine insurance. The book discusses in detail the overarching system of risk management that lay at the heart of absolutism itself. I was delighted to interview Dr. Wade to dig deeper into his book.
Topic:
History, Economy, Economic Growth, State, Interview, and Capital
Political Geography:
Europe and France

4. The Impact of ICT and Intangible Capital Accumulation on Labour Demand Growth and Functional Income Shares

Author:
Robert Stehrer
Publication Date:
07-2022
Content Type:
Working Paper
Institution:
The Vienna Institute for International Economic Studies (WIIW)
Abstract:
This paper investigates whether the diffusion of tangible IT and CT capital and intangible capital asset types has an impact on labour demand growth and the share of labour income in total income at the industry and country level. The econometric analysis is derived from a Cobb-Douglas production function taking empirical stylized facts into account. The effects of technical progress embodied in the various forms of capital impact along inter-industry and intercountry production linkages, which are considered by using global value chain indicators. The analysis is broken down to examine the influence on different types of labour, including the dimensions of gender, age, and educational attainment. Accumulation of ICT assets have generally insignificant and in some cases small positive effects on labour demand and income shares, though patterns differ across types of labour. Intangible assets show a positive relation with respect to labour demand growth.
Topic:
Labor Issues, European Union, Capital, Income, and Capital Accumulation
Political Geography:
Europe

5. Emerging Europe and the capital markets union

Author:
Alexander Lehmann
Publication Date:
09-2020
Content Type:
Policy Brief
Institution:
Bruegel
Abstract:
The European Union’s capital markets union (CMU) plan is in urgent need of a revamp. Because of Brexit, EU capital markets and supervision need to become more integrated. The ongoing deep recession increases the need for equity finance mobilised by capital markets. The eleven EU countries in central and south-eastern Europe which joined the EU in 2004 and after (EU11) are particularly affected by the ongoing consolidation of exchanges, which has diminished liquidity in smaller markets and in the traded securities of mid-sized companies. Corporate funding remains even more bank-dependent in the EU11 than in the rest of the EU. Equity capital, whether in the form of listed shares or directly supplied by investment funds, is particularly underdeveloped. Even though the sustained and superior growth record in the region compared to the rest of the EU should be a magnet for investors, cross-border exposure to traded equity in the region remains very limited. To gain broader acceptance in all EU countries, CMU will need to support more forcefully funding for small and medium enterprises (SMEs), and foster market integration throughout the single market, including outside the euro area. The immediate priorities for the EU should be to revise market regulation and facilitate capital market access by smaller firms. Lighter standards in dedicated SME markets should be widened for newly-listed companies, but should not be available to more mature listed companies. In this way, high standards of transparency and integrity, which have been bolstered by post-financial crisis regulation, will be preserved. The EU11 countries need to embrace corporate governance rules and greater transparency of company financial data, which would facilitate equity finance. They must also attract investors who will seek disclosure of environmental, social and governance performance of issuers. Much could be done to foster liquidity on national exchanges, including by embracing the inevitable further consolidation of exchanges and other infrastructure.
Topic:
Markets, European Union, Regulation, Finance, Business, Capital, Corporate Governance, and Private Equity
Political Geography:
Europe

6. Creation of a European Solidarity Funds: Directing Europeans’ savings towards their growth companies

Author:
Emmanuel Sales
Publication Date:
11-2020
Content Type:
Policy Brief
Institution:
Robert Schuman Foundation (RSF)
Abstract:
Europe has an excess of savings and its companies lack equity capital. This diagnosis was made a long time ago and the crises the continent has been going through over the last 10 years have accentuated this gap. European growth companies are rapidly falling prey to large non-European firms that benefit from a deep and liquid stock market. Thus, despite the existing arrangements, Europe is unable to impose world champions that would allow it to build its sovereignty against the United States and China. The creation of a new category of UCITS funds open to all EU savers, the European Sovereign Funds, would help us respond to this challenge by providing medium-sized companies with the fresh capital they need to ensure their development and independence.
Topic:
Financial Crisis, European Union, Economic Growth, and Capital
Political Geography:
Europe

7. Intellectual Capital in Islamic Banking Sector: Evidence from Turkey

Author:
Hakan Uslu
Publication Date:
01-2020
Content Type:
Journal Article
Journal:
The Rest: Journal of Politics and Development
Institution:
Centre for Strategic Research and Analysis (CESRAN)
Abstract:
The Islamic banking sector has experienced a rapid development both in Muslim and non-Muslim geographies. In this study, using a panel dataset spanning the time period 2005-2018 and several econometric estimations, how intellectual capital affects the financial performance of the participation banks, as Islamic banks are called in Turkey is analysed. The Value-Added Intellectual Coefficient model (VAIC), a well-known methodology, is utilised as a measure for intellectual capital performances and return on assets (ROA) and return on shareholders’ equity (ROE), in general, financial performances of the banks. The results of the analyses provide evidence for a positive and statistically significant impact of intellectual capital on financial performances of Islamic banks operating in Turkey. The results also suggest that employed capital efficiency and structural capital efficiency in the operations of Islamic banks are the two crucial factors for their profitability, while human capital efficiency has no statistical relationship with their financial performances. The current study contributes to the relevant literature since there is no study on Islamic banks of Turkey in the aspect of intellectual capital and helps Islamic bankers, such as executives, investors and shareholders, or policymakers in understanding and determining their positions regarding intellectual capital.
Topic:
Banks, Financial Institutions, Capital, and Banking
Political Geography:
Europe, Turkey, and Asia

8. Politics in the Interest of Capital: A Not-So-Organized Combat

Author:
Cornelia Woll
Publication Date:
07-2015
Content Type:
Working Paper
Institution:
Max Planck Sciences Po Center on Coping with Instability in Market Societies (MaxPo)
Abstract:
The rise in inequality has been explained with reference to organized groups and the lobbying of the financial sector. This article argues that the image of politics as organized combat is contradicted by empirical evidence on lobbying in the United States, and does not travel well to Europe. The power of finance does not operate through organized political influence. Rather, politics in the interest of capital unfolds as a structural feature of advanced economies over time. Tellingly, at the height of the financial crisis, one of the most promising strategies of institutions seeking government support was not organizing for combat, but collective inaction. Our challenge, then, is to explain how the power of finance has built up and is playing out in creating inequality. A more structural, less agency-focused perspective highlights how the rise of finance has been supported by actors that few would accuse of being finance-friendly, such as the European center-left parties and consumers. Reconceptualizing the power of finance has important implications for political solutions to rising inequality.
Topic:
Economics, Politics, Inequality, Finance, and Capital
Political Geography:
Europe

9. Age and Productivity. Human Capital Accumulation and Depreciation

Author:
Anna Ruzik-Sierdzińska, Claudia Villosio, Maciej Lis, Michele Belloni, and Monika Potoczna
Publication Date:
11-2013
Content Type:
Special Report
Institution:
Center for Social and Economic Research - CASE
Abstract:
This report, titled "Age and Productivity. Human Capital Accumulation and Depreciation", was released within a project NEUJOBS- “The Impact of Service Sector Innovation and Internationalisation on Growth and Productivity”, funded by the European Commission, Research Directorate General as part of the 7th Framework Programme. The report focuses on links between age, productivity and lifelong learning. Various data sources (EU-SILC, LFS, Structure of Earnings Survey, SHARE, ELSA, SHARELIFE) and methodological approaches were used in this report. The analysis identifies clusters of countries with common characteristics of age-earnings profiles (for certain groups of employees) and allows for an explanation of those differences. Some differences can be attributed to the share of sectors, education types, and occupations in country-specific employment. Others are due to labour market institutions and the (dis)incentives to work at older ages provided by social security systems. Additionally, the dynamics of earnings after age 50 differ less between educational and occupational groups than at earlier ages. The authors show that the dynamics of average wages are strongly influenced by the timing of entering and leaving labour market. An estimation of the impact of LLL on productivity (measuredby earnings) at older ages shows that for employees aged 50+, participation in training increases wages in the short-term.
Topic:
Demographics, Economics, Human Capital, Aging, Labor Market, and Capital
Political Geography:
Europe